Changes in expectations can shift supply or demand.

Question

Quizplus · Accepted Answer

Expectations are a key determinant of both supply and demand. A change in expectations can shift either the supply curve or the demand curve, leading to changes in quantity and price. For example, if consumers expect a product to become more popular in the future, they may increase their demand for it now, leading to a rightward shift of the demand curve. Similarly, if producers expect the cost of production to decrease in the future, they may increase supply now, leading to a rightward shift of the supply curve.

Changes in Expectations Can Shift Supply or Demand