Download Shifts of the Demand Curve

 Demand-
the desire to own something AND the
ability to pay for it.
 The Law of Demand
PRICE
GOES
UP
DEMAND
GOES
DOWN
AND….
As price
goes down,
you
demand
more of
something!

Substitution Effect- When the price of one
good rises, you demand less of that good, and
demand more of another good.

Income Effect- If you buy fewer of one good
without buying other goods because of rising
prices.

Demand Schedule- table that lists the
quantity of a good that a person will
purchase at each price.
A
demand curve is accurate only as long as
there are not changes other than price that
could affect the consumer’s decision.
A
store owner would choose what price and
quantity combination from the list that
would maximize profits, and produce that
amount of goods.
 Hold
everything else constant.
Change in quantity demanded
caused by a change in price
is shown as a movement
along a demand curve
3
Price
0
.5
1
1.5
2
2.5
CHANGE IN
QUANTITY
DEMANDED
0
1
2
3
4
5
Quantity
When we allow other factors to change,
we no longer move along the demand
curve, the ENTIRE demand curve shifts.
Price
1.5
2
2.5
3
CHANGE IN
DEMAND
1
Original
Demand
0
.5
New
Demand
0
1
2
3
4
5
Quantity
A
change in the price of a good does not
cause the demand curve to shift.
 Income
 Consumer
Expectations
 Consumer
Tastes and Advertising
 Population
A
consumers income affects his or her
demand for most goods.
 Most items that are purchased are normal
goods- goods that consumers demand more
of when their incomes increase.

Income increase from $50 to $75, buy more
normal goods at every price level
 Other
goods are called inferior goods (A
good that consumers demand less of when
their incomes increase)

Generic cereal, used cars, used paperback
books.
 Changes
in the size of the population will
also affect the demand for most products.
A
rise in population will increase the demand
for houses, food, and many other goods and
services.
 Over
the next few decades, the market will
face rising demand for the goods and services
that are desired for senior citizens

Medical care, recreational vehicles…
 Our
expectations about the future can affect
our demand for certain goods today.
 The
current demand for a good is positively
related to its expected future price.


If you expect the price of a TV to rise, your
current demand will rise, which means you will
buy the good sooner.
If you expect the price to drop, your current
demand will fall and you will wait for the lower
price.
 Certain
Fads
 Clever
advertising campaigns, social trends,
the influence of TV shows… or combined.
 CHANGES
 Hope
IN TASTES AND PREFERENCES
to increase the demand for their
product—increasing money spent on
advertising.
 The
demand curve for one good can be
affected by a change in the demand for
another good.
 Compliments-
two goods that are bought and
used together

Skis and ski boots
 Substitutes-
goods used in place of one
another.

Skis and snowboards
 When
the price of skis go up, the demand for
ski boots fall. (demand shifts left)
 When the price of skis go down, the demand
for ski boots rise. (demand shifts right)
 When
the price of skis go up, the demand for
snowboards go up. (demand shifts right)
 When the price of skis go down, the demand
for snowboards go down. (demand shifts left)