Monday, February 4, 2013

Change in Consumer Preferences and Demand

One of the topics in Prin. of Microeconomics is consumer behavior, which is represented very simply by a demand curve (line).  What the demand curve actually represents is the relationship between the price (per unit) of a good or service and the amount that a consumer would be willing to purchase of that good or service.  That's it.

While that seems to be rather a simple idea, there is also much more going on in terms of consumer behavior.  Consumer's are often changing their preferences, observing other prices of related goods or services change among a number of other things.  When something other than the price of the good or service changes, economists represent that as a shift in the demand curve.  Here is an example of changes in customer's preferences in the cellular telephone market, where BlackBerry customers are having a decline in their preference for BlackBerry cell phones, which does not seem to be driven strictly by the prices of substitutes (iPhones or Android) smart phones.

On the other hand, The New York Times reports that the demand for tree nuts (almonds, pecans, etc.) is increasing due to a change in tastes by Chinese consumers.  This is an excellent example of a shift in the demand for a good (tree nuts) to the right.

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