Transcript 6.3 Determinants of Demand

6.3
Determinants
of Demand
 Change
in quantity demanded = the
quantity demanded for a product may
change if the price changes.
PQD
 Determinants
or
PQD
of Demand:
1. Changes in the consumers’ incomes
2. Change in the consumers’ attitudes
3. Change in the price of a complementary
product
4. Changes in the price of a substitute
products
1. Changes in the consumers’ incomes
--A person wins the lottery and now
spends much more money daily
2. Change in the consumers’ attitudes
--Fashion changes often—leg warmers are
out; therefore, people are no longer
going to buy them and they will stop
being produced
3.Change in the price of a complementary
product
--CDs go on sale; therefore, there is an
increase in the amount of CD players
purchased
4. Changes in the price of a substitute
products
--Instead of buying Tide brand detergent
you buy Kroger brand because it is
cheaper
EFFECT
OF CHANGING INCOME:

People with higher incomes can be expected to
buy more clothes, CDs, hot fudge sundaes

Normal Goods = goods for which demand goes
up as income goes up
 Expensive
water

cars, house, filet mignon, Perrier
Inferior Goods = goods for which demand goes
down as income goes up
 Spam,
cigarettes, off brand products
EFFECT OF CHANGING ATTITUDES:
 Attitudes
= tastes and preferences
 Change
in tastes and preferences can
cause demand to increase and decrease.
 What
was once popular may not be any
longer
EFFECT OF CHANGING PRICE OF SUBSTITUTE
GOODS:
 Substitute
products = products that are
similar enough that you can replace them
Butter
and margarine
Doritos
 If
and Lays Potato Chips
the price of one goes up, then consumers
may be inclined to buy the other product.
EFFECT OF CHANGING PRICES OF
COMPLEMENTARY GOODS:
 Complementary
together.
goods = goods that go
 The
2 goods are complementary so if there
is a decrease in the price of one then there
may be an increase in the purchase of the
other
EX:
If the price of snowboards goes down
then there may be an increase in the
purchases of snowboards and therefore
snowboard clothing as well.
Increase in demand—shifts the demand
curve to the right
Decrease in demand—shifts the demand
curve to the left.
INCREASE TO THE RIGHT
DECREASE TO THE LEFT