Question

3.4 [Related to the Economics in Practice on p. 52] In the town of)Hurley, Wisconsin, an unseasonably warm summer sam temperatures rising into the mid-90s for a weeklong streach in July. This was almost 20 degrees above the average high temperature of 77 degrees for this hottest month of the year. This unexpected heat wave resulted in a significant increase in household purchases of central air conditioning systems, which are uncommon in this part of the country. Which determinant or determinants of demand were most likely factors in the households' decisions to purchase these air conditioning systems, and how would these purchases affect the demand curve for central air conditioning systems?

Answer 1

DEMAND for a product is based on many factors which are known as determinents of demand such as price of the product, income of the consumer, change in taste in preferance of the customer,change in technology, seasonal factor, future expectation and avalability of the good. these factors affect the demand of the product

In the given scenario, when the temperature went above the expected level , it gave rise to situation , where it was really tough to survive without an Air conditioner. So, the determintent consider here for increase in demand of air condtioner is the seasonal factor.

The factor which influence the demand of air condition are priice of air conditioner, price of the substitutes and income of the customer and taste and preperances of the customer. The expectations about the heating effect in the future and expectatiions about the future price also affect the decision of customer.

when the demand for a product is increasad due to decrease in its own price, other things being equal, there is a movement along the demand curve

But when factor other than price affect the demand of a commodity. there is a shift in the demand curve.

Price Q* Q Quantity

figure 1

The demand curve for the air conditioning system rises from p * to p₁