Transcript Luxury Goods Inferior Goods

Shifts in Demand
Shifts in Demand
Increase in Demand
Decrease in Demand
Price ($)
Price ($)
D
D1
D
Quantity
An increase in demand will cause the
demand curve to shift to the RIGHT
D1
Quantity
An decrease in demand will cause the
demand curve to shift to the LEFT
There are 4 things that will SHIFT
the demand curve
1. A change in tastes and Preferences
• This may be influenced by
advertising, values, the
weather, the season or
fashion.
Tastes and Preferences
• Isobel has seen her best friend playing a nintendo dsi and is
now desperate to buy one. Draw a graph illustrating the effect
on Isobels demand for Nintendo dsi’s.
• Neema has recently read that fish oil is supposed to improve
memory and brain development. Draw a graph illustrating the
effect on Neema’s demand for Salmon.
• Cameron recently became sick after eating too many Easter
eggs and now he cannot stand the taste of chocolate. Draw a
graph illustrating the effect on Cameron’s demand for chocolate
• Joel has seen the latest skateboard advertised while he has
been watching his favourite TV show. He thinks they look
fantastic. Draw a graph illustrating the effect on Joel’s demand
for skateboards
Workbooks page 34-7
2. Income
• Income = The funds received by a person or household. E.g.
Salary, wages, benefit, inheritance
• If a persons income increases they are able to buy more of a
good or service at the same price because they can afford to
• We all pay tax on our income, this is called PAYE (Pay as you
earn)
• Disposable income = Income after paying tax
• If the tax we pay decreases then our disposable income
increases and our demand will also increase. The opposite will
also occur if tax rates increase.
Workbooks page 39-42
Income and types of goods
• We can classify goods as being either, Luxuries,
Necessities or Inferior goods.
NORMAL GOODS
• Are products that we
demand more of when
our income rises. Most
products have this
“normal” relationship.
INFERIOR GOODS
• Are products which we
buy less of as our
income rises.
• As our income increases
we switch our spending
towards higher quality
products.
Luxury Goods
• More expensive
higher quality versions
of goods
• E.g overseas travel or
expensive cars.
• Luxuries are goods
that usually take up a
great proportion of
income
Increase in Income
Luxury Goods
Inferior Goods
Price ($)
Price ($)
D
D1
D
Quantity
D1
Quantity
As income increases, consumers switch consumption from inferior goods to more
luxury type goods
Workbooks page 39-42
3. SUBSTITUTES
• Substitutes are
products that we can
use instead of each
other. If the price of one
rises, the quantity
demanded falls causing
an increase in demand
for the other.
SUBSTITUTES
P
P
d
d’
Q
Q
BUTTER
d
MARGARINE
Price of butter falls. Quantity demand for butter increases. Demand for
margarine falls
4. COMPLEMENTS
• Complements are
products that we
usually use together.If
the price of one rises,
quantity demanded falls
causing a decrease in
the demand for the
other.
COMPLEMENTS
P
P
d
CARS
Q
d
d”
Q
PETROL
Price of cars falls. Quantity demanded for cars increases. Demand for
petrol increases.
Workbooks page 49 -52
Quantity Demand or Demand