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(Demand Shifters) What is a change in demand? • Any change that alters the quantity demanded at every price. • A shift in the demand curve, either to the left or right. Increase Right-----Decrease Left IRDL the Turtle Shifts in the Demand Curve Price of Ice-Cream Cone Increase in demand Decrease in demand D1 D D2 0 Quantity of Ice-Cream Cones Demand Shifters: Tastes & Preferences of Consumers Income of Consumers Related Goods: Substitutes & Complements Expectations of Future Price Changes Size of population/Market Tastes & Preferences of Consumers • As people’s tastes change in P favor of a good, or an effective advertising campaign has been waged, demand increases (shifts to the right). P • As people’s tastes change against a good, or a good loses popularity, demand decreases (shifts to the left). D D1 Q D1 D Q Example: When Michael Jordan began endorsing the products, demand for Nike & Gatorade increased. Income of Consumers • As income increases, consumer demand for goods and services increases (shifts to the right). • As income decreases, consumer demand for goods and services decreases (shifts to the left). Example: When Billy got laid off from his job, his demand for gourmet steak dinners decreased. Related Goods: Substitutes Substitute goods can be easily used in place of one another. • If two goods are SUBSTITUTES, when the price of Good A increases, demand for Good B increases (shifts to the right). • If two goods are SUBSTITUTES, when the price of Good A decreases, demand for Good B decreases (shifts to the left). Example: Demand for Starbucks changes when Caribou alters its prices Related Goods: Complements Complementary goods are used WITH each other. • If two goods are COMPLEMENTS, when the price of Good A increases, demand for Good B decreases (shifts to the left). • If two goods are COMPLEMENTS, when the price of Good A decreases, demand for Good B increases (shifts to the right). Example: Demand for ketchup changes when hamburger prices fluctuate Substitute OR Complementary? • Cars and Tires • Corn and Beans • DVD Players and DVD’s • Natural Gas and Electricity • Cereal and Milk • Toast and Jam • Sweatshirts and Sweaters Expectations of Future Price Changes • If consumers expect the price of a good to rise in the future, immediate demand increases (shifts to the right). • If consumers expect the price of a good to decrease in the future, immediate demand decreases (shifts to the left). Example: Demand for gas changes throughout the week Size of Population/Market • As the number of consumers in a given market increases, demand increases (shifts to the right). • As the number of consumers in a given market decreases, demand decreases (shifts to the left). Example: Demand for girl scout patches increases when more girls join girl scouts Variables That Influence Buyers