Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Document
Document related concepts
Transcript
The Law of Demand Change in Quantity Demanded A movement from on point on the demand curve to another is a change in quantity demanded. This movement is caused by a change in price of the product. ONLY a change in the price of the product will cause a change in the quantity of product demanded. A shift in the curve is caused by factors other than Change in Demand (Shifts in Demand Curve) An increase in demand means people are willing and able to buy more at each price. A decrease in demand means people are willing and able to buy less at each price. Factors That Shift Demand Factors that Shift the Market Demand – A change in income inferior vs. normal goods – A change in tastes or preferences – A change in the price of related goods compliments vs. substitutes – Number of consumers in the market – A change in the expected future price of the good (consumer expectations) – A change in consumer information Consumer Surplus Demand price is the maximum consumers would be willing to pay Consumers would happily pay a lower price Consumer surplus is the value received for goods in excess of the price paid for it. Because there is consumer surplus in a market economy, consumers are better off! Substitution and Income Effects – Why the demand curve is downward sloping! Income effect: When the price of a good falls, consumers experience an increase in purchasing power. Substitution effect: When the price of the good changes, consumers will substitute toward the now relatively less expensive good. Diminishing Marginal Utility – As more is consumed, the marginal utility is smaller. Utility-Maximizing Rule MUx/Px=MUy/Py Demand Shift? If Demand Shifts, Inc/Dec? Curve Shifts Left/Right? Why? What impact do the following headlines have for the demand for beef? Price of Beef Rises in June Millions of Immigrants Swell US Population Pork Prices Drop Surgeon General Warns that Eating Beef is Hazardous to Health Beef Prices Fall; Consumers Buy More Real Income for US Drops for Third Month Charcoal Shortage Threatens Memorial Day Cookouts Nationwide Fad: The Disco Burger
