Transcript File

(Demand Shifters)
What is a change in demand?
• Any change that alters the quantity
demanded at every price.
• A shift in the demand curve, either
to the left or right.
Increase Right-----Decrease Left
IRDL the Turtle
Shifts in the Demand Curve
Price of
Ice-Cream
Cone
Increase
in demand
Decrease
in demand
D1
D
D2
0
Quantity of
Ice-Cream Cones
Demand Shifters:
Tastes & Preferences of Consumers
Income of Consumers
Related Goods: Substitutes & Complements
Expectations of Future Price Changes
Size of population/Market
Tastes & Preferences of
Consumers
• As people’s tastes change in
P
favor of a good, or an effective
advertising campaign has been
waged, demand increases
(shifts to the right).
P
• As people’s tastes change
against a good, or a good loses
popularity, demand decreases
(shifts to the left).
D
D1
Q
D1
D
Q
Example: When Michael Jordan began
endorsing the products, demand for
Nike & Gatorade increased.
Income of Consumers
• As income increases, consumer demand
for goods and services increases (shifts to
the right).
• As income decreases, consumer
demand for goods and services
decreases (shifts to the left).
Example: When Billy got laid off from
his job, his demand for gourmet steak
dinners decreased.
Related Goods:
Substitutes
Substitute goods can be easily used in place of
one another.
• If two goods are SUBSTITUTES, when the
price of Good A increases, demand for
Good B increases (shifts to the right).
• If two goods are SUBSTITUTES, when the
price of Good A decreases, demand for
Good B decreases (shifts to the left).
Example: Demand for Starbucks
changes when Caribou alters its prices
Related Goods:
Complements
Complementary goods are used WITH each other.
• If two goods are COMPLEMENTS,
when the price of Good A increases,
demand for Good B decreases
(shifts to the left).
• If two goods are COMPLEMENTS,
when the price of Good A
decreases, demand for Good B
increases (shifts to the right).
Example: Demand for ketchup changes
when hamburger prices fluctuate
Substitute OR
Complementary?
• Cars and Tires
• Corn and Beans
• DVD Players and DVD’s
• Natural Gas and Electricity
• Cereal and Milk
• Toast and Jam
• Sweatshirts and Sweaters
Expectations of Future
Price Changes
• If consumers expect the price of a
good to rise in the future, immediate
demand increases (shifts to the
right).
• If consumers expect the price of a
good to decrease in the future,
immediate demand decreases
(shifts to the left).
Example: Demand for gas
changes throughout the week
Size of Population/Market
• As the number of consumers in a
given market increases, demand
increases (shifts to the right).
• As the number of consumers in a
given market decreases, demand
decreases (shifts to the left).
Example: Demand for girl scout
patches increases when more
girls join girl scouts
Variables That Influence Buyers