Shifters of Demand

Question 1

What increases consumption and shifts demand to the right?

Answer 1

• consumer optimism
• asset prices rising (ie. your home value going up, consumers feel more wealthy)
• income tax rates fall (more $ in consumer pockets)
• interest rates fall (cheaper to buy large purchases)

Question 2

What decreases consumption and shifts demand to the left?

Answer 2

• consumer pessimism
• asset prices fall (ie home value decreasing, consumers feel less wealthy)
• income taxes rise (less money in consumer pockets)
• interest rates rise (harder to buy large purchases)

Question 3

What causes increases in business investment and shifts demand to the right?

Answer 3

-private sector domestic business investments rise
ie) new tools and tech
new construction
more manufacturing inventory

Question 4

what causes decrease in business investment and shifts demand to the left?

Answer 4

-private sector dom. bus. investments fall
ie) less tech
less new construction
less manufacturing inventory or stagnant