Download Factors Affecting Demand

Factors Affecting Demand
Chapter 4
Section 2
What kinds of things will
affect the quantity
demanded of any product?
America’s Pastime?
Nationwide, the average number of
children playing America’s once-favorite
pastime has tumbled nearly 20%. Sales of
everything from balls to baseball cards are
falling.
Sporting Goods Manufacturers Association
The Next Wave?
Retailers are looking to the next big wave of
consumers to drive demand. Marketers
hear a demographic drumbeat: The current
bulge of 27 million teens is expected to swell
10% by 2010. Companies are rushing to
quantify every aspect of the adolescent
lifestyle.
Wall Street Journal
The Income Effect
Movie Tickets
$ 8.00
$ 6.00
x
5
x
5
$40.00
$30.00
You are $10
“richer.”
What would you do
with the $10?
• Would you buy
more tickets?
• Would you buy
popcorn and soda?
• Would you save it?
The Income Effect
• The same is true in reverse.
• If the price goes up, you “feel”
poorer and may buy fewer tickets.
• You may even be influenced by your
feelings to buy less of other things as
well.
The Substitution Effect
If an appropriate substitute is
available:
– Consumers tend to replace more costly
items with less expensive ones.
– The quantity demanded changes
because of the change in the relative
price of the products.
Change in Demand
Sometimes something happens that
changes the entire demand curve.
Demand may go up or down.
May be predictable.
May be unexpected.
Changes in Consumer Income
Income changes will cause a
change in demand.
• What happens if you get a
raise?
• What happens if you lose
your job?
Changes in Consumer Tastes
•
•
•
•
•
Advertising
Fashion trends
New products
New technology
Consumer concerns
– Environment
– Health
Changes in Substitutes
• If the price of a related product
changes, it may affect the demand for
your product.
• Butter – Margarine
• High gas prices are affecting sales of
SUV’s.
Complementary Goods
• Increased use of one product increases
the use of the other.
• Computer prices go down, so we buy
more software to go with our new
computers.
• Air fares drop, so we buy flights to
vacation spots, and then buy clothes,
accessories, cameras, etc., for our trip.
Changes in Expectations
• Announcement of new advancement
in technology
• World events change supply in oil.
• A developer announces a new project
in your area.
Change in Population
• If population increases, demand for
almost everything increases.
• If population decreases, demand
decreases.
ASSIGNMENT
Write ½ page about how demand
changes could affect your
entrepreneurial project.