Determinants of Demand vs Determinants of Supply
Determinants of Demand and Determinants of Supply are two Supply & Demand concepts in AP Economics that students often mix up. Determinants of demand are factors that shift the demand curve, changing the quantity demanded at each price. Determinants of supply are factors that shift the supply curve, changing the quantity supplied at each price. Here is how they compare side by side.
The main determinants of demand are consumer income, preferences, the prices of related goods, and expectations. When these factors change, the demand curve shifts to the right or left. For example, if consumer income rises, demand will shift to the right, indicating an increase in demand at each price level.
The main determinants of supply are technology, input costs, government policies, and expectations. When these factors change, the supply curve shifts to the right or left. For example, if a new technology makes production more efficient, supply will shift to the right, indicating an increase in supply at each price level.
Determinants of Demand vs Determinants of Supply: Which List a Shifter Belongs To
| Determinants of Demand | Determinants of Supply | |
|---|---|---|
| The standard list | Tastes, related goods, income, number of buyers, expectations, often taught as TRIBE | Resource costs, other goods' prices, technology, taxes and subsidies, expectations, number of sellers, often taught as ROTTEN |
| Buyer income | Shifts it right for a normal good and left for an inferior good | Does nothing to it directly, since income belongs to the buyer's side |
| An expected price rise next month | Increases it today, because buyers pull purchases forward | Decreases it today, because sellers hold output back for the better price |
| Related goods | Substitutes and complements in consumption. Cheaper tea lowers demand for coffee | Substitutes and complements in production. A higher soybean price lowers the supply of corn from the same acres |
| A per-unit tax on producers | Leaves it where it is, since buyers' willingness to pay has not changed | Shifts it up by the amount of the tax at every quantity, which reads as a leftward shift |
| The good's own price | Not a determinant. It produces a change in quantity demanded along a fixed curve | Not a determinant either, and the trap is that an input's price is not the good's own price, so cheaper steel really does shift the supply of cars |
Expectations is the one shifter that appears on both lists and points opposite ways
Every other determinant sits on exactly one list. Expectations sits on both, and it moves them in opposite directions. Suppose a tariff on imported coffee is announced today and takes effect next month. Buyers expect a higher price soon, so they stock up now and current demand shifts right. Sellers expect that same higher price, so they hold beans back to sell later and current supply shifts left. Both shifts push today's price up, which makes the price prediction easy, but they push quantity in opposite directions, so today's quantity traded is indeterminate. Compare that with income, which touches demand alone, or input costs, which touch supply alone. This is the most reliable multiple choice trap in the unit, because a student who memorized expectations as a demand shifter moves one curve, sees demand rise, and confidently predicts a larger quantity. Write down both shifts separately before predicting anything, and label which variable each one is answering.
Substitutes in production and substitutes in consumption sound alike and land on different curves
Two goods can be related in either of two ways, and questions are built on students noticing only one of them. Tea and coffee are substitutes in consumption: cheaper tea makes buyers want less coffee, so demand for coffee shifts left. Corn and soybeans are substitutes in production: a farmer with fixed acreage who sees the soybean price climb plants soybeans instead, so the supply of corn shifts left. Same phrase, different curve, and the price prediction reverses between them, since a leftward demand shift lowers the price of the good while a leftward supply shift raises it. Complements behave the same way. Printers and ink are complements in consumption, so a cheaper printer raises demand for ink. Beef and leather are complements in production, joint outputs from one animal, so a higher beef price raises the supply of leather. Whenever a question names a second good, read it once as a buyer decision and once as a seller decision before choosing which curve moves.
When both lists fire at once, one of price or quantity is always indeterminate
Start with demand P = 60 - Q and supply P = Q, crossing at 30 units and 30 dollars. Now let two things happen together: buyer income rises, which shifts demand right, and an input gets cheaper, which shifts supply right. Say demand moves right by 10 units at every price, becoming P = 70 - Q, while supply moves right by 30 units, becoming P = Q - 30. The new equilibrium is 50 units at 20 dollars, so quantity rose and price fell. Now keep that same demand shift but make the supply shift small, just 2 units, so supply becomes P = Q - 2. The new equilibrium is 36 units at 34 dollars. Quantity rose again, and this time price rose with it. Quantity is determinate because both shifts push it the same way. Price is indeterminate because the shifts pull it in opposite directions, and the winner depends on the relative sizes, which the question does not give you. The full credit answer names quantity as rising and the price effect as indeterminate.
Frequently asked questions
Is the price of the good a determinant of demand?
The good's own price is not a determinant of demand or of supply. A change in that price moves you along a fixed curve, which is a change in quantity demanded or quantity supplied rather than a shift. The determinants are everything else: income, tastes, related goods, the number of buyers, and expectations on the demand side, and input costs, technology, producer taxes and subsidies, expectations, and the number of sellers on the supply side. Readers grade the vocabulary, so save shift language for cases where a determinant genuinely changed.
Why does an expected price increase shift demand and supply in opposite directions?
Expected future prices change the timing of decisions on both sides of the market, and the two sides want opposite timing. A buyer expecting a higher price next month buys now, which raises demand today. A seller expecting that same higher price waits, which cuts supply today. Both effects push the current price up, so the price prediction is unambiguous. Quantity is not, because rising demand and falling supply move it in opposite directions, and nothing in the question tells you which effect dominates.
Do input costs ever shift the demand curve?
Input costs shift the supply curve of the good being produced, never its demand curve. The confusion comes from a real second market. Steel is an input for cars, so a cheaper steel price shifts the supply of cars right. In the market for steel itself, the demand comes from carmakers, which is derived demand, and it shifts when car production changes. Keep the two markets on separate diagrams and the question answers itself: ask which good is being bought and sold on the axes in front of you.
Live Supply and Demand graph. Drag the curves, or open the full version.
Related comparisons
Get AP Econ exam tips in your inbox
Occasional emails with study tips, new interactive graphs, and exam-season reminders. Free, no spam.
No spam. Unsubscribe anytime. Read our privacy policy.
Keep track of what you have studied
A free EconLearn account adds progress tracking, your quiz history, and achievements. Studying here is free either way, and there is nothing to pay for as a student.
Create a free accountAlready have one? Sign in
Last updated