Shift in demand curve

Shift in demand curve

1. Professor, Lawyer & Entrepreneur Professor, Lawyer & Entrepreneur
Puttu Guru PrasadPuttu Guru Prasad
VVIT- Skill Development Center – VVIT- Skill Development Center –
Nambur.Nambur.
93 94 96 98 98- -807 444 95 39

2. 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!

3. 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.

4. 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.

5. 0 1 2 3 4 5
0







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5







1







1
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5







2







2
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5







3
Change in quantity demanded
caused by a change in price
is shown as a movement
along a demand curve
Price
Quantity
CHANGE IN
QUANTITY
DEMANDED

6. 0 1 2 3 4 5
0







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5







1







1
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5







2







2
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Price
Quantity
When we allow other factors to change,
we no longer move along the demand
curve, the ENTIRE demand curve shifts.
CHANGE IN
DEMAND
Original
Demand
New
Demand

7. A change in the price of a good does not
cause the demand curve to shift.
Income
Consumer Expectations
Consumer Tastes and Advertising
Population

8. 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.

9. 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…

10. 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.

11. Certain Fads
Clever advertising campaigns, social trends,
the influence of TV shows… or combined.
CHANGES IN TASTES AND PREFERENCES
Hope to increase the demand for their
product—increasing money spent on
advertising.

12. 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

13. 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)