Transcript Document

Shifts in Demand
INCREASE IN DEMAND

A change in one of
those “other factors”
may cause an
increase in demand.
 This means that
“Ceteris Paribus” no
longer holds.
P
$
D’
D
Q
There are 4 things that will
move the demand curve
1. A change in tastes and
Preferences
 This
may be influenced by
advertising, values, the
weather, the season or
fashion.
2. Income

If peoples incomes increase, their demand for
Normal goods will increase.
 If the goods are inferior then as income rises,
demand for them falls.
 Any changes to income tax rates will effect
disposable income (income left after paying tax.
 A reduction in income tax rates will increase
disposable income, increasing demand
NORMAL GOODS

Are products that we
demand more of
when our income
rises. Most products
have this “normal”
relationship.
INFERIOR GOODS

Are products which
we buy less of as our
income rises. As our
income increases we
switch our spending
towards higher quality
products.
3. SUBSTITUTES

Substitutes are
products that we can
use instead of each
other. If the price of
one rises, the quantity
demanded falls
causing an increase
in demand for the
other.
Activities
 1.
Bradley has an MP3 player that he was
given when he was 9 years old. Now that
he is 14, he sees that many of his friends
have an ipod touch.
 Draw
a graph of the likely effect this
realisation will have on Bradleys demand
for an ipod touch.
SUBSTITUTES
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P
d
d’
Q
Q
BUTTER
d
MARGARINE
Price of butter falls. Quantity demand for butter increases. Demand for
margarine falls
4. COMPLEMENTS

Complements are
products that we
usually use together.If
the price of one rises,
quantity demanded
falls causing a
decrease in the
demand for the other.
COMPLEMENTS
P
P
d
CARS
Q
d
d”
Q
PETROL
Price of cars falls. Quantity demanded for cars increases. Demand for
petrol increases.