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Word Count: 373
A change in demand will cause equilibrium price and output to change in the same direction A decrease in demand will cause a reduction in the equilibrium price and quantity of a good The decrease in demand also causes excess supply to develop at the initial price Excess supply will cause prices to fall and as the price falls producers are willing to supply less of the good thereby decreasing output An increase in demand will cause an increase in the equilibrium price and quantity of a good The increase in demand causes excess demand to develop at the initial price Excess demand will cause the price to rise and as price rises producers are willing to sell more thereby increasing output There are many factors that can cause a change in demand but there seems to be four main factors that effect it the most First a change in consumers income can shift the curve If there is an increase in consumers income the demand curve will shift to the right Second a change in population can shift the curve If the population increases the demand curve shifts to the right Another important factor is the preferences of the consumer If the consumers preference for a certain good increases this will also shift the curve to the left The last and possibly most important factor is the prices of related goods In regard to substitutes if the price of a substitute increases the demand curve for the original good will shift to the right For example if the price of Pepsi rises the demand curve for Coke shifts to the right In regard to complements if the price of a complement increases the demand curve for the original good will shift to the left If McDonalds raises the price of its Big Mac the demand for french fries shifts to the left because fewer people walk in the door to buy the Big
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