Population growth
An increment in population translates into a rise in demand for various products and services. This arises from the fact that various individuals have diverse products and service requirements. To ensure that an increment in demand is met, the supply of goods and services has to be sufficient. On the other hand, the demand for products and services changes depends on age and the wants of the population.
An increase in population will push both demand and price up, as illustrated in the graph above.
The prices of resources used in the production of good X increases
An increase in the price of resources used in the production of goods and services will lead to high costs of production. As a result, manufacturers are forced to increase the prices of goods so as to meet the increase in the cost of production. Consumers are price-sensitive, and as such, an increment in the price of products makes them change their consumption pattern with regard to purchasing products whose prices have increased.
Graph illustrating the relationship between the demand, supply, and price
The resultant effect is a reduction in the demand for such products and services. On the other hand, suppliers will be encouraged to supply more goods with an increment in the price level. This arises from the fact that selling at higher prices will guarantee higher revenues.
The income of consumers of normal good X increases
An increase in income means that consumers will demand more of the product. Increased demand for the product translates into an increment in their supply. This will lead to an outward shift in both the demand and supply curves.
Graph illustrating the relationship between demand and supply of a normal good.
The government is paying a $1 per unit subsidy for each unit of good Y produced
When the government decides to pay $ 1 per unit for each unit of Y produced, producers will strive to produce more of good Y. This will increase supply in the market, which will ultimately lead to a price reduction. On the other hand, producers will also reduce prices because they do not have to incur that extra $ 1.
This subsidy will push the production further and thus make the goods more available to the population.
The income of consumers of inferior good Y decreases
When there is a decline in the income level of consumers who consumer inferior goods, there will be an increment in their demand. For example, increased demand for good Y means that demand for good X will decline.
