Shifts in the demand curve are caused by factors other than the price of the product changing.
Possible causes for a shift in demand is are:
- Changes disposable incomes after tax
- Changes in price of substitutes
- Changes in the price of a complement products (joint demand)
- Tastes and fashion changes
- Spending on advertising
- Population changes
- Other factors, e.g. hot weather increases demand for cold drinks and sun creams
Substitute products have a positive relationship. If price of one goes up, demand for the other goes up and vice versa.
Examples of Substitute products are butter and margarine. If the price of butter had to increase, it could lead to demand for margarine increasing from D1 to D2 (outward shift).
Complements or Joint demand products
Complements have a negative or inverse relationship. If the price of one goes up, the demand for the other goes down.
Examples of complement products are printers and ink cartridges, fuel and cars.
If the price of printers had to increase, it could lead to the demand for ink cartridges decreasing from D1 to D2 (inward shift).