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Ceteris Paribus
• “All other things held constant”
• Demand curves are accurate as long as there
are no other changes than PRICE
• Price causes movement ALONG the demand
curve
• Other factors cause the demand curve to
SHIFT
A shift in a demand curve
is not the same as
moving along a demand
curve.
Normal v. Inferior Goods
• Most goods are normal
goods- goods we
demand more of when
our income increases
– Ex. new cars, HDTV
• Inferior goods are those
you would buy in
smaller quantities if
income increased
– Ex. generic products,
used cars
What causes a shift?
Income
• Inferior goods are
purchased when income
drops
Consumer Expectations
• Expectations of higher or
lower prices in the future
can cause demand to
increase or decrease
What causes a shift?
Population
• Rise in population creates
higher demand for housing,
food, utilities, etc.
Consumer Taste/Advertising
• Advertising & publicity
often play a role in creating
fads & social trends
Complements v. Substitutes
• Complements are two goods that are bought
and used together
– Examples?
• Substitutes are goods used in place of one
another
– Examples?
We can sum up these factors as:
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•
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•
•
T
R
I
P
E
Tastes & preferences
Related goods
Income
Population
Expected pricing
Complete demand
scenarios
worksheet on
your own.