Which of the following can affect demand?

• A. Change in income
• B. Price change in related good (sub or compliment)
• C. Future expectations
• D. All of the above

Answer: (D)

Demand is how much buyers are willing and able to purchase at different prices, and it can be shifted by factors other than the good’s own price. A change in income shifts demand because what people can afford changes; higher income generally increases demand for many goods, while lower income reduces it (note that some goods behave differently, like inferior goods). The price of related goods also affects demand: for substitutes, a rise in the price of one good can push demand toward its substitute, increasing demand there; for complements, a rise in the price of one good reduces demand for its complement. Expectations about the future matter too: if people expect prices to rise later, they may buy more now, increasing current demand, and if they expect incomes to rise, they might adjust their purchasing plans accordingly. Because each of these factors can shift the entire demand curve, all of the above can affect demand. Remember, a change in the good’s own price changes quantity demanded along the curve, not the overall demand.