What effect can expectations about future prices have on current demand?

Expectations about future prices can significantly influence current demand. When consumers anticipate that prices will rise in the future, they are more likely to purchase goods now to avoid paying higher prices later. This behavior reflects an increase in current demand for the expected items. For example, if people expect the price of a particular product to increase next month, they may choose to buy more of that product this month, increasing current demand.

This relationship demonstrates how consumer behavior is interconnected with market expectations. The anticipation of future price changes can thus shift the demand curve to the right, indicating a higher quantity demanded at current prices. Understanding this concept is crucial in microeconomics, as it illustrates the dynamic nature of market interactions and helps to predict consumer behavior based on anticipated economic conditions.