(f) Government regulations Government regulations can be responsible for a change in demand for a product due to a new tax or regulation. Changes in demand due to changes in government regulations will cause a demand curve to shift. For example, an increase in Value Added Tax (VAT) will increase prices and discourage consumer demand. On the other hand, government grants provided to households to become more energy efficient could cause a rise in demand for solar panels. When the government introduced a tax on plastic bags this led to a big fall in demand for plastic bags as shoppers began bringing their own bags, instead of paying for them.
(g) Natural causes Natural causes such as cold and wet weather can reduce demand for products such as ice cream, but increase demand for umbrellas and sun holidays. Population can influence demand if the number of customers in the market is growing or shrinking. Generally, when the population of a town or country is growing, demand for goods and services in the area also rises. Changes in demand due to natural causes or changes in population will cause a demand curve to shift.
Numeracy
What effect do you think that the following events will have on the demand curve for oil? Tick the correct answer.
1. Oil companies reduce the price of oil. Movement up q Movement down q Shift left q Shift right q
2. The government imposes a large tax increase on oil. Movement up q Movement down q Shift left q Shift right q
3. A major decrease in the price of cars. Movement up q Movement down q Shift left q Shift right q
4. A very cold winter in Ireland causes increased demand for heating oil. Movement up q Movement down q Shift left q Shift right q
5. New technology means solar power becomes cheaper and more plentiful.
Movement up q Movement down q Shift left q Shift right q 6. Compare your answers with another student’s answers. 346
