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Transcript
Change in Demand
a) Normal Goods
• Goods for
which demand
increases as
income
increases
b) Inferior goods
• Goods for
which demand
decreases as
income
increases
II) Changing Attitudes
• A) Change in
attitude leads to a
change in demand
1) Can be because
of social
mores/fashion
2) Advertising
III) Changing Substitutes
• A) Demand for
substitute products is
related
1) Price of butter rises,
demand for margarine
will increase.
2) Substitutes are similar
enough that one can
replace the other
IV) Changing Complementary
Goods
• A) A decrease in price
of one good increases
demand in the other
– 1) Hot dog prices drop,
demand for hot dog buns
will increase.
– 2) These are goods that
are almost exclusively
used together.
V) Change in Demand vs.
Change in Qty. demanded
A
P
P
B
D1
D
QD
QD
D2
VI) Elasticity of Demand
• A) Degree of change in
quantity consumed
compared to change in
price.
– 1) Product with high
elasticity shows great
change.
– 2) Product with low
elasticity shows little
change.
b) Price Elasticity of Demand
=Percentage Change in Quantity Demanded
Percentage Change in Price
1) If greater than 1, it’s price
elastic
P
D
QD
2) If less than 1, it’s price
inelastic
P
D
QD
3) If equal to 1, it’s unitary price
elasticity
P
D
QD