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Economics Unit 4, Lesson 1 Demand Change in QD or Change in D ©2012, TESCCC Objectives 1. Understand the difference between a change in demand and a change in quantity demanded. 2. Identify the determinants of a change in demand and quantity demanded. 3. Graph a change in D and QD. ©2012, TESCCC Change in Quantity Demanded A change in quantity demanded is caused by a change in price. This is the only reason for a change in quantity demanded. ©2012, TESCCC P D P1 Q1 ©2012, TESCCC Q Change in Quantity Demanded Since the demand curve shows the quantity demanded at all prices if price is the only thing that changes, then our demand curve is still valid and we can show this change by simply moving along the demand curve. ©2012, TESCCC P P2 P1 D Q2 QD ©2012, TESCCC Q1 Q Change in Demand ©2012, TESCCC If one of the conditions changes, willingness or financial ability of people to buy different amounts of goods and services, we see a change in demand at each and every price level. The original demand curve is no longer valid. We must have a new demand curve. This is called a shift of the demand curve. ©2012, TESCCC The entire demand curve shifts. Increase in Demand P D1 Q ©2012, TESCCC The entire demand curve shifts. Increase in Demand P D1 D2 Q Shift Right ©2012, TESCCC The entire demand curve shifts. Increase in Demand P Decrease in Demand P D1 D2 Q Shift Right ©2012, TESCCC D1 Q The entire demand curve shifts. Increase in Demand P Decrease in Demand P D1 D2 D2 Q Shift Right ©2012, TESCCC D1 Q Shift Left Five Reasons for a Change in Demand ©2012, TESCCC Five Reasons for a Change in Demand 1. Change in Consumer Taste or Preference ©2012, TESCCC Five Reasons for a Change in Demand 1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc. ©2012, TESCCC Five Reasons for a Change in Demand 1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc. The good becomes more popular, so the curve: Shifts Right ©2012, TESCCC Five Reasons for a Change in Demand 1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc. Or If the good becomes unpopular, the curve will: Shift Left ©2012, TESCCC Five Reasons for a Change in Demand 2. Change in Consumer Income ©2012, TESCCC Five Reasons for a Change in Demand 2. Change in Consumer Income Income Demand Income Demand ©2012, TESCCC at each and every price level Shift Right at each and every price level Shift Left (if the good is a normal good) Five Reasons for a Change in Demand 3. Change in Market Size or Number of Buyers or Groups Within the Population ©2012, TESCCC Five Reasons for a Change in Demand 3. Change in Market Size or Number of Buyers or Groups Within the Population Market Size Market Size ©2012, TESCCC Demand Shift Right Demand Shift Left Five Reasons for a Change in Demand 4. Change in Consumer Expectations about Price ©2012, TESCCC Five Reasons for a Change in Demand 4. Change in Consumer Expectations If buyers think price will go up in the future, then demand now Shift Right If buyers think price will go down in the future, then demand now Shift Left ©2012, TESCCC Five Reasons for a Change in Demand 5. Change in Price of Related Goods There are two types of related goods. ©2012, TESCCC Five Reasons for a Change in Demand 5. Change in Price of Related Goods A. Substitute - can use one good in place of another ©2012, TESCCC Five Reasons for a Change in Demand 5. Price of Related Goods A. Substitute - can use one good in place of another Price of butter , then demand for margarine? ©2012, TESCCC Five Reasons for a Change in Demand 5. Price of Related Goods A. Substitute - can use one good in place of another Price of butter , then demand for margarine Shift Right ©2012, TESCCC . Five Reasons for a Change in Demand 5. Price of Related Goods B. Complement - one good used with another good ©2012, TESCCC Five Reasons for a Change in Demand 5. Price of Related Goods B. Complement - one good used with another good Price of milk , then the demand for cookies? ©2012, TESCCC Five Reasons for a Change in Demand 5. Price of Related Goods B. Complement - one good needed to use another good Price of milk , then the demand for cookies Shift Left ©2012, TESCCC . Five Reasons for a Change in Demand – This might help you remember these reasons. TIMER • • • • • T = Change in consumer Taste I = Change in consumer Income M = Change in Market Size or # of buyers E = Change in consumer Expectations R = Change in price of Related Goods ©2012, TESCCC