Future price expectations
Also called: expectations · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 9, Ch 9 "The Price Puzzle: What Drives the Market"
Meaning
Future price expectations are what buyers and sellers believe will happen to prices. They change demand today. If people expect prices to fall, they postpone purchases, so current demand falls. If they expect prices to rise, they buy earlier, so current demand rises. Sellers react the same way: they hold back stock if they expect higher prices later. A change in expectations shifts the demand curve. It is not a true exception to the law of demand.
Example
Families delay buying a television or fridge until the Diwali or New Year sales. When onion prices start climbing, some buyers stock up because they expect prices to go higher. Potato wholesalers hold stock if they expect prices to rise.
Don't confuse with
- Veblen good: buyers want more at a higher price because of prestige. With expectations, buyers are reacting to the price they expect in future, not to the current price.
Related concepts
- Determinants of demand
- Related goods
- Substitute goods
- Complementary goods
- Consumer income
- Purchasing power
- Population size and composition
- Shift in demand curve
- Movement along the demand curve