Effect of change in Taste and Preferences on the demand for a good.

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Learning Contents:

·           Effect of Favorable taste and preferences on the demand for a good

·           Effect of Unfavorable taste and preferences on the demand for a good

Introduction

Taste and Preferences indicate consumer’s likes, dislikes, choices, opinions, etc. that keep on changing with time and therefore, affect the demand for different goods and services. A good for which a consumer develops positive taste and preferences, its demand would increase and therefore, the demand curve would shift to the right. On the other hand, a good for which a consumer develops negative taste and preferences, its demand would decrease and therefore demand curve would shift to the left. 

Taste and preferences are influenced by advertisement, change in fashion, climate, research and inventions, culture, etc. For e.g. a consumer would prefer to buy more of those goods which are in fashion today and hence their demand will increase. So, this post would explore how demand for good changes in two situations  given as follow:

a. When favorable taste and preferences are developed.

b. When unfavorable taste and preferences are developed.

 

a. When favorable taste and preferences are developed.


A consumer if develops positive taste and preferences, causes demand to increase and therefore, shifts the demand curve to the right. Figure 1.1 illustrates the situation showing that a consumer initially purchases OC1 units of good at OP1 price. D1 is the initial demand curve. Suppose, price is constant and if the consumer develops positive taste and preferences, then demand increases from OC1 to OC2 and therefore, the demand curve shifts to the right from D1 to D2. This forward shifting of the demand curve is called an increase in demand.




b. When unfavorable taste and preferences are developed.




A consumer if develops negative taste and preferences, causes demand to decrease and therefore, shifts the demand curve to the left. Figure 1.2 illustrates the situation showing that a consumer initially purchases OC1 units of good at OP1 price. D1 is the initial demand curve. Suppose, price is constant and if the consumer develops negative taste and preferences, then demand decreases from OC1 to OC2 and therefore, the demand curve shifts to the left from D1 to D2. This backward shifting of the demand curve is called a decrease in demand.



We summarize this by saying that there exists a positive relationship between taste and preferences and the demand for the good. It means positive or favorable taste and preferences indicate increased demand for a good and vice versa.



Choose the correct answer based on the above learning

1.Which of the following refers to ‘Preferences’ influences demand here?

a. the availability of a good to all income classes.

b. directly observable changes in prices and income

c. the excess of wants over the available supplies

d. an individual's attitudes toward goods and services.


2. Rashi is seen wearing a new short and sleek dress which is in trend nowadays. People want this dress. Which demand determinant are we talking about?

a. Change in Consumer Income

b. Change in Consumer Tastes

c. Change in Price of Substitute Good

d. Change in Consumer Price Expectations

3. What type of relationship exists between Taste and preferences and demand for the goods?

a. Positive

b. Negative

c. Both a. and b.

d. No relation exists

4. As a result of favorable ‘taste and preferences’ demand curve

a. becomes a horizontal straight line

b. becomes a vertical straight line

c. shifts to the right

d. shifts to the left


5. The demand curve for good shifts to the_________ when the consumer develops ________ taste and preferences.

a. right; negative

b. left; positive

c. left; negative

d. Both a. and b.


Answer Key:

 

1.d

2.b

3.a

4.c

5.c


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