Supply and Demand Determinants

Definition

Supply and demand determinants are factors that influence changes in supply or demand for a particular good or service. These determinants can shift the entire supply curve or demand curve.

Analogy

Think of supply and demand determinants as ingredients that affect how much of a certain food item is available at a restaurant. For example, if there's an increase in labor costs (a determinant), it may lead to higher prices (shift in supply). Similarly, if there's an increase in consumer income (a determinant), it may result in more customers demanding that food item (shift in demand).

Related terms

Elasticity: Elasticity measures how responsive quantity demanded or supplied is to changes in price or other factors.

Equilibrium Price/Quantity: Equilibrium price is the price at which quantity demanded equals quantity supplied. Equilibrium quantity is the corresponding amount bought and sold at that price.

Substitutes and Complements: Substitutes are goods that can be used in place of each other, while complements are goods that are consumed together. Changes in the price of one good can affect the demand for its substitutes or complements.