Transcript 1187302Factors Affecting Demand

Factors Affecting Demand
21.2
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What factors cause market demand
to change?
• The factors that affect demand are
population of an area, consumers taste,
their expectations, and their income.
What does it mean when the
demand curve shifts to the right?
• When the demand curve shifts to the right
it means that demand for that product or
service has INCREASED at all prices.
What does it mean when the
demand curve shifts to the left?
• When the demand curve shifts to the left it
means that demand has DECREASED at
all prices.
Identify and Describe ….the
causes of demand shifts.
• Change in POPULATION:
– The number of people in an area.
– Population will increase when more people
move into an area or are born in an area. This
will cause demand to increase because there
are more people.
– Population will decrease when people move
out of an area or die in that area. This will
cause demand to decrease because there are
less people.
Identify and Describe ….the
causes of demand shifts
• Change in INCOME:
– Money people make from working.
– When people get a raise, get a job, or get a
better job they will make more money. This
will cause demand to increase because they
people can purchase more.
– When people lose their job or get a pay cut
they have less money to spend. This will
cause a decrease in demand.
Identify and Describe ….the
causes of demand shifts
• Change in TASTE:
– Taste is the popularity of a good or service.
– When and item is popular the demand for it
will increase.
– When an item becomes old news or less
popular the demand for it will decrease.
Identify and Describe ….the
causes of demand shifts
• Change in EXPECTATIONS:
– Expectations are they way people think about the
future.
– If people expect a new product to come out demand
for the old product will decrease because they are
waiting to buy the new one.
– If people expect their will be a shortage of a product
the demand will increase because they want to stock
up.
– If people are worried about the economy they will hold
onto their money so demand will decrease because
they are buying less.
What two factors about the
products themselves can influence
a change in demand?
• Demand for a product can be influenced
by the price and quality of related/similar
goods.
• Example: demand for Ford products
will change when Chevrolet comes out
with a better truck or has a sale!
What is the difference between
substitutes and complements?
• A substitute is used in place of another
product.
• A complement is used with another
product.
Examples:
• What are some
examples of
substitutes?
– An example of a
substitute would be
juice boxes instead of
soda.
– Another example
would be using butter
instead of margarine.
• What are some
examples of
complements?
– An example of a
complement would be
a TV remote and
batteries.
– Another example
would be a lamp and a
light bulb.
Changes in Price:
• How does a change in
price of substitute affect
the demand of the other
product?
• How does a change in the
price of a complement
affect the demand of the
other product?
– If the price of a product
goes up the demand for its
substitute will go up.
– If the price of a product goes
up the demand for its
complement will go down.
– If the price of butter goes
up the demand for
margarine will go up.
– If the price of a DVD player
goes up the demand for
DVDs will go down.
What is the only factor that can
directly cause a change in the
quantity of a good?
• The only factor that can directly change
the demand for a good is its own price!
Define Demand Elasticity
• Demand elasticity is how much a change
in the price of a product will change the
demand for that product.
How do substitutes affect demand
elasticity?
• If there are substitutes for a product then the
demand will be elastic.
• If there aren’t substitutes then demand inelastic!!
• This means that when the price of one goes up
people will buy less of it and simply buy the
substitute.
What does it mean if the demand
for a good or service in inelastic?
• If demand for a good
• Can you think of any
is inelastic that means
examples of this?
that when the price
– An example would be
electricity for your
goes up or down
home.
people are going to
– Another example
demand the same
could be gas for your
amount.
car.
Demand for necessities is…
• Inelastic
– You need these items so when the price goes
up you will still need to buy them .
Demand for luxuries is…
• Elastic
– You don’t have to have them so when the
price goes up you will buy less.