Shifts in Demand and Supply

Demand and supply do not remain static. They shift due to external factors:

Factors that shift demand:

• Income changes (higher income → more demand).
• Consumer preferences (healthy lifestyle increases demand for organic food).
• Price of related goods (if the price of tea rises, demand for coffee may increase).
• Population growth (more consumers → higher demand).

Factors that shift supply:

• Technology (better machinery → more supply).
• Cost of production (higher wages or raw material costs reduce supply).
• Government policies (taxes or subsidies).
• Natural conditions (drought reduces agricultural supply).