When people talk about the demand for something, they are typically referring to how many units of that thing will be purchased, or demanded, per period.
Specifically, demand is defined as the amount of a good or service that consumers are willing and able to buy at each price in a given time period.
Changes in the demand for something can be caused by a variety of factors. Some of these factors include changes in price, taste preference, and competition. Let’s take a closer look at each of these factors:
Change in Price – As the price of a good or service changes, so does the number of units that consumers are willing and able to buy. This is because people have limited resources such as money and time, so when the price of something goes up, people must either spend less money on this item or purchase something else.
Taste Preference – As taste preferences change, so does the number of units that consumers are willing and able to buy. For example, if more people begin to like thin-crust pizza over thick-crust pizza, then the demand for thin-crust pizza will increase.
Competition – As competition increases or decreases, so does the demand for a good or service. If more competitors enter into an industry, then there will be more competition which will cause prices to go down due to supply increasing while demand remains steady. This would cause decreased demand.
The price of thick-crust pizza
Many people love pizza, and many people love thin-crust pizza. If the price of thick-crust pizza went up, or if its consumption went down, the demand for thin-crust pizza would go up.
People who like thick-crust pizza would probably spend more money on it, and people who do not like it would spend less of it. The same would go for consumption.
The only way that a shift of the demand curve for thin-crust pizza would not be caused by a change in either price or quantity demanded of thick-crust pizza is if there was some other reason people suddenly wanted more thin-crust pizza.
Maybe there’s a sale on olives, so people decide that they want more olive pasta instead of plain pasta to go with their thin crust pizzas. Thus, the demand for thin crust pizzas increases due to the increased demand for olive pasta to go with it.
The price of tomato sauce
While a change in the price of tomato sauce would affect the quantity of pizza ordered, it would not shift the demand curve for thin-crust pizza.
Tomato sauce is one of the components of pizza, along with cheese, dough, and other optional toppings. A change in the price of tomato sauce would not affect people’s desire for pizza.
People who like thin-crust pizza like it because of the cheese and dough component, and how they interact with each other. A higher price for tomato sauce would not cause people to want more cheese or anything else on their pizza–they just like what is already there.
A change in the price of any component except for cheese would not cause a shift in the demand curve for thin-crust pizza. A change in the price of anchovies might cause a small shift in demand, but not a complete shift in demand.
The price of cheese
Many people believe that the price of cheese directly influences how much people want to consume of it. This is true for most foods, including pizza.
People like extra cheese on their pizza, which requires more cheese being purchased and used. If the price of cheese were to increase, then consumers would need to pay more for the same amount of cheese they want on their pizza.
They might choose to have less cheese instead due to the price increase making it less affordable. The same would be true for businesses that purchase cheese for sandwiches or other dishes they serve.
There would be less demand for thin-crust pizzas due to this change in the price of cheese, and companies would have to cut back how much they purchase to match demand. This would cause a decrease in supply which would then cause an increase in price.
The availability of toppings
A new innovation in pizza production that has caused a shift in the demand curve for thin-crust pizza is the creation of gluten-free crusts.
Many people have allergies to gluten, a protein found in wheat. Gluten can also make eating difficult for people with celiac disease, an autoimmune condition that attacks the small intestine.
Gluten-free crusts are becoming more popular as people with these allergies and celiac disease increase in number. People who do not have these conditions may also prefer gluten-free crusts.
The increase in demand for gluten-free crusts will cause a left shift of the demand curve for thin-crust pizza.
Consumer wealth
A change in consumer wealth would mean that people would have more or less money to spend on pizza. If people had more money, they may want to spend that money on more expensive pizzas or all-around higher-quality pizzas.
A decrease in consumer wealth would mean that people would have less money to spend on anything, let alone pizza. This would lead to a decrease in the demand for pizza overall. People might opt for cheaper alternatives like dough balls or sandwiches instead.
Consumer wealth does not affect the demand for thin-crust pizza specifically. A change in consumer wealth would cause a shift in the demand curve for all types of pizza, but not only thin-crust pizza.
This is because the demand curve assesses how many units of a good or service consumers will buy at different prices, and doesn’t account for which type of pizza they will buy.
Demand curve shifts due to consumer taste changes
A change in consumer taste does not cause a shift in the demand curve. For example, if people started preferring pizza with thick crusts, then businesses that specialize in thin-crust pizza would suffer.
Consumer tastes do not change quickly, so businesses are mostly safe from this cause of demand curve shifts. However, businesses can do some things to prevent consumer tastes from changing their products.
Marketing and advertising is one way to keep consumer tastes steady. By constantly reminding people about a product, they will continue to like it and want it, thus not causing a shift in the demand curve.
Another way is by introducing new products that people will start to like instead. If a business keeps producing new and better products, then people will start to prefer those and lose interest in older ones.
Demand curve shifts due to consumer income changes
A change in consumer income does not usually cause a shift in the demand curve.
Rather, a change in consumer income tends to cause consumers to spend more money on goods that are discounted.
For example, if consumers have more money, they may buy more high-end pizzas instead of the cheaper ones. Or, they may buy extra toppings to make the pizza bigger and worth the higher price.
They would not typically buy less pizza overall due to the increase in income. The relationship between price and how much pizza people buy does not change due to income changes.
Consumer surplus would not decrease due to the increase in income. More people would pay the same price for a good, so their total benefit would remain the same. Only those who receive discounts would benefit more from an increase in income.
Demand curve shifts due to consumer cost-consciousness changes
A decrease in the cost of pizza would not cause people to prefer thinner crusts over thicker crusts. People like what they like, and that does not change due to cost.
If Domino’s dropped the price of their thin-crust pizzas, then people would buy them more because they are cheaper, but the proportion of people who like thin crusts versus thick crusts would not change.
A drop in the price of pizza overall would not cause a shift in the demand curve for thin-crust pizza. If everyone likes all kinds of pizza equally, then there would be no change in demand for any type of pizza.
The only way a drop in the price of pizza would cause a shift in the demand curve for thin-crust pizza is if there were some kind of external factor that caused people to think that only thin-crust pizzas are good.
