Download Section 13 - Carsonville Port Sanilac

Understanding Changes in Other Demand Variables
Ä
Ä
Ä
Ä
Ä
Ä
Review: A change in quantity demanded is a movement along the
demand curve caused by a change in the price of the good.
Review: A change in demand is a shift in the demand curve caused by
changing a variable other than price.
Substitute goods are goods that can be purchased instead of the original
good because they satisfy the same needs.
Complementary goods are goods that are closely related to and used
with the original good.
A normal good is a good characterized by rising consumption when a
consumer’s income rises.
An inferior good is a good characterized by falling consumption when a
consumer’s income rises.
Substitute goods are goods that a
consumer can purchase in place of the
original good because of the similarity
of the products.
In the example on the left, if the price
of bagels increases, the consumer
would demand more bread. If the
price of bagels falls, the consumer
would demand less bread and more
bagels at every price.
Note: This change is a change in
demand, and the result is an outward
shift in the demand curve.
Complementary goods are goods
that are closely related to the original
good and are often purchased
together. In this case, cheese and
bread are complements.
If the price of cheese falls, the demand
for bread will increase because
consumers will want more cheese
sandwiches. The result is a change in
demand (a shift in the demand curve).
www.compasslearning.com
Copyright ã 2006, Thinkwell Corp. All Rights Reserved.
1163.doc –rev 11/07/2006
A normal good is one whose
consumption increases when income
increases. When household income
increases as shown on the left,
consumers demand more of the good
at every price and the demand curve
shifts outward. A decrease in
household income will cause an inward
shift of the demand curve.
An inferior good is one whose
consumption decreases when income
increases. When household income
increases as shown on the left,
consumers demand less of the good at
every price and the demand curve
shifts inward. A decrease in household
income will cause an outward shift of
the demand curve.
Expectations about future prices will
cause a consumer’s demand to change
in the present. If the consumer
expects the price of bread to rise in the
future, he/she will demand more bread
now at every price while bread is
relatively inexpensive. As shown on
the left, the consumer’s demand curve
shifts outward. If the consumer
expects the price of bread to fall in the
future, his/her demand curve for bread
will shift inward.
www.compasslearning.com
Copyright ã 2006, Thinkwell Corp. All Rights Reserved.
1163.doc –rev 11/07/2006
To summarize: A change in price
means that there is a change in
quantity demanded. This change is a
movement along the demand curve.
When you change any of the factors—
except price—that influence demand,
you will cause a change in demand.
The demand curve will shift in or out
depending on the direction of the
change in the factor.
www.compasslearning.com
Copyright ã 2006, Thinkwell Corp. All Rights Reserved.
1163.doc –rev 11/07/2006