Shifts in Demand.ppt

Changes in demand

1. Shifts in Demand
Unit 2

2. Demand Review
What is demand?
What is the Law of Demand?
What makes demandhave a downward
slope?

3. Demand Curve
Price
Quantity
D
Inverse relationship
between priceand
quantity demanded
P Qd
P Qd

4. Change in Quantity
Demanded
Changes in pricecause a change in
quantity demanded
Illustrated by moving from one point
to another on the demand curve

5. Changes in Demand
INCREASEin Demand: people are willing
and able to buy MOREof a good AT
EVERY PRICE LEVEL
DECREASEin Demand: People are
willing and able to buy LESSof a good
AT EVERY PRICE LEVEL
Illustrated by shifting the entire demand
curve

6. Increase in Demand
INCREASEin
demand shifts in
the demand
curve to the
RIGHT
Price
Quantity
D1
D2

7. Decrease in Demand
DECREASEin
demand shifts in
the demand
curve to the
LEFT
Price
Quantity
D1
D2

8. Why Demand Shifts:
Determinants of Demand
Income
Tastes and
Preferences
Substitute Goods
Complementary
Goods
Weather
Number of
Buyers
Expectations

9. Income:
Inferior vs. Normal Goods
Inferior Goods
Demand decreaseswhen income increases
Demand increaseswhen income decreases
Normal Goods
Demand increaseswhen income increases
Demand decreaseswhen income decreases

10. Tastes and Preferences
Demand increases and decreaseswith
changes in tastes/preferences
Fadscauses changes in demand
Advertisinginfluences consumers’ tastes

11. Price of Substitute Goods
If price of one good increases, the quantity demanded
decreases.
DEMAND for its SUBSTITUTE INCREASES
If price of a good decreases, the quantity demanded
increases
DEMAND for its SUBSTITUTE DECREASES

12. Price of Substitute Goods
Price of of a
Good
Increases
Quantity
Demanded
Decreases
DEMAND for
Substitute Good
Increases
Price of of a
Good
Decreases
Quantity
Demanded
Increases
DEMAND for
Substitute Good
Decreases

13. Price of Complementary Goods
If price of one good increases, the quantity demanded
decreases.
DEMAND for its COMPLEMENT also DECREASES
If price of a good decreases, the quantity demanded
increases
DEMAND for its COMPLEMENT also INCREASES

14. Price of Complementary Goods
Price of of a
Good
Increases
Quantity
Demanded
Decreases
DEMAND for
Complementary
Good Decreases
Price of of a
Good
Decreases
Quantity
Demanded
Increases
DEMAND for
Complementary
Good Increases

16. Number of Buyers
INCREASEof #
of buyers INCREASESdemand
DECREASEof #
of buyers DECREASESdemand

17. Expectations
Expectations for future income
Demand increaseswith expected
increasein income
Demand decreaseswith expected
decreasein income

18. Expectations
Expectations for future prices
If you expect prices to increasein
the future, demand will increase now
If you expect prices to decreasein
the future, demand decreases now

19. Expectations
Expectations for what product will do for
you
If product will be good for you,
demand increases
If product will be bad for you,
demand decreases