Transcript ECONOMICS CHAPTER 2, SECTION 2

ECONOMICS
CHAPTER 3, SECTION 2
Changes in Demand
I. Demand Shifts

A. With the passage of time, factors other
than price (non-price factors) can affect
demand for a good or service.
I. Demand Shifts

B. The result of non-price factors
affecting demand is that the entire
demand curve shifts either to the
right or to the left.
I. Demand Shifts
P
Q
I. Demand Shifts

C. This means that quantity demanded
changed at every price.
II. Increases and Decreases
in Demand

A.
An INCREASE in
demand shifts the
entire demand
curve to the
RIGHT.
I. Demand Shifts
P
D1
Q
D2
II. Increases and Decreases
in Demand


B.
A DECREASE in
demand shifts the
entire demand
curve to the LEFT.
I. Demand Shifts
P
D1
D2
Q
III. Determinants of Demand

A. There are five non-price factors
which determine demand for a good
or service:
1. Consumer Taste and Preference
2. Market Size
3. Income
4. Prices of Related Goods
5. Consumer Expectations
1. Consumer Taste and
Preference

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Consumers’ taste and preference for
comfort, quality, trends, holidays,
seasons, etc. can have an effect on
demand.
Ex.
2. Market Size

Changes in the size of the market can
have an effect on demand. Three
factors can change market size:
2. Market Size
A. Decisions made by private
businesses, ex. Production decisions,
advertising campaigns, hiring
practices, use of celebrities
2. Market Size
B. Government policies, ex.
Regulations/laws, trade with foreign
countries
2. Market Size
C. New technology, ex.
3. Income


Changes in consumers’ income can
have an effect on demand.
Ex. Losing a job, getting a pay raise,
being promoted
4. Prices of Related Goods


The demand for a good or service can
be affected by the prices of related
goods
There are two types of related
goods:
4. Prices of Related Goods




A. Substitute goods
are goods that can be
used to replace a
similar good
Ex.
P of original good
increases, D for
substitute good
increases
P of original good
decreases, D for
substitute good
decreases
4. Prices of Related Goods

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B. Complementary
goods are goods that
are usually used
together
Ex.
P of original good
increases, D for
complement good
decreases
P of original good
decreases, D for
complement good
increases
5. Consumer Expectations


Expectations of one’s future income
can have an effect on demand.
Ex.