Transcript S&D - Cloudfront.net

S&D
Determinants of Demand
Why might demand go up or
down even if the price of the
product remains the same?
Imagine that the Subway
across the street sells 40 $5
foot longs on an average day.
Why might quantity
demanded go up to 60 even if
the price stays at $5?
Graphing Demand
Price
Quantity
Demanded
$3
60
$5
40
$7
20
With 2 dashed lines, draw the
following on the same graph!
Price
Quantity
Demanded
Price
Quantity
Demanded
$3
80
$3
50
$5
60
$5
30
$7
40
$7
10
Determinants of Demand:
factors (other than price) that affect
demand
1. Consumer Income:
• Normal goods: real income increase,
demand of these increases
• TVs, steaks, cell phones
• Inferior goods: real income decreases,
demand of these increases
• Laundry mat, used products, bologna
2. Price of Related Goods
A. Substitutes:
• Price of sub increases, demand
of original increases
• Price of sub decreases,
demand of original decreases
• Price of El Pollo Loco
doubles! Will demand for
Subway increase or
decrease?
B. Complements: products that
you buy together
• EX: milk & cookies
– Airplane tickets & hotels
• Price of complement increases, demand
for original decreases
• Price of complement decreases, demand
for original increases
– If there’s a huge salsa sale, what will happen
to the demand for chips?
3. Types of consumers
• Increase in elderly – demand for “elderly”
products will increase
– Ex:
• Increase in teenagers – demand for “teen”
products will increase
– Ex:
• Right now, which group is larger? Who
should you make products for?
4. Consumer Expectations
• How do most ppl feel about the economy
right now?
– If consumers expect econ to be bad –
demand decreases
– If consumers expect econ to improve –
demand increases
5. Consumer preferences
• The last answer!
• How ppl feel about the product – is it
“cool”?