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Demand. Demand and Supply. Why do roses cost more on Valentine’s Day? Why do TV ads cost more during the Super Bowl ($2.7 million for 30 sec.) than during Nick at Nite reruns?

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Demand

Demand


Demand and supply

DemandandSupply

Why do roses cost more on Valentine’s Day?

Why do TV ads cost more during the Super Bowl ($2.7 million for 30 sec.) than during Nick at Nite reruns?

Why do hotel rooms in Sun Valley, Idaho cost more in the winter than in the summer?

Why do surgeons earn more than butchers?

Why do pro basketball players earn more than pro hockey players?

Why do economics majors earn more than most other majors?

Why are some of you going to major in economics in college?

The answer to these and other economics questions boil down to the workings of supply and demand – the subject of this chapter.

“Econ, Econ”


Demand

Individual Demand

To

Market Demand

“JO”

“Mo”

“Bo”

D

D

D2

D

D

1

[Total]

=

$3

$3

+

+

$3

$3

$2

$2

$2

$2

26

40

35

30

115

115

45

39

100

From “individual” demand to “market” demand

And, what if the price of this product decreases from $3 to $2?

A point to point movement on the same “D” curve is a “Change in QD”

And – what if this good prevents cancer, so we have an increase in “D” for it.


Demand

P

QD

DEMAND SCHEDULE

Consumers“willingness to buy”

Price decreases; QD increases

D

$5

$4

$3

$2

$1

$5

4

3

2

1

10

20

35

55

80

0 10 20 35 55 80

Quantity Demanded

…a specifiedtime period

…other things being equal

QD – how much will be purchased at a specific price [& date].


Demand

Law of Demand [Change in QD]

D

Reasons For Downsloping “D” Curve

1. Income Effect –current buyers buy more.

2. Substitution Effect– new buyers now purchase.

3. Diminishing MarginalUtility - because buyers

of successive units receive less marginal utility,

they will buy more only when the price is lowered.

[8GB]

iPhone

$399.00

[with 2 yr contract]

Change in QD

1. Price change

2. Movement

[up/down the demand curve]

3. Point to point [along the curve]

Price

QD

$250.00

Inverserelationship

QD1

QD2

“D” refers to the “whole curve”.[“all prices”]

“QD” refers to a “point on the curve”

based on a “particular price.”


Demand

D

Three Reasons Why the Law of Demand Exists

P1

P2

QD1

QD1

  • Income Effect

    • When things are expensive, money buys less

    • When things are cheap, money buys more

  • Substitution Effect

    • When apples are expensive and their

      substitutes (pears) are relatively cheap,

      I buy fewer apples and more pears

  • Diminishing Marginal Utility

    • Each additional unit of an item purchased gives less marginal utility (happy points) than the previous unit. Therefore, the only way I will buy more is if the price is lower.

    • Ex. When I’m hungry, I typically will buy2 breakfast tacos. The reason I don’t buy a third taco is because the marginal utility of the third taco is less than the price of the taco. But, if the price of the taco is less than the marginal utility of the taco, then I will buy the third taco


Demand

Graphing The Demand Curve

[Price Change, Point to Point Movement]

Picture of

Law of

Demand


Elastic or inelastic total receipts test

Elasticor Inelastic(Total Receipts Test)

$2

$1

Elastic

Inelastic

20 30 40 50

Total Receipts Test

20 x $2 = $40

Total Receipts Test

20 x $2 = $40.00

50 x $1 = $50

30 x $1 = $30.00


Demand

11.Elasticity of D – the way price affects QD.12.Elastic- QDthat isvery responsive to price.13.Inelastic- achg in price has littleimpact on QD.

  • Elastic (flexible) Demand

  • Substitutes (butter)

  • Luxury(mink coat)

  • Expensive(car)

  • Has durability(refrigerator)

  • Lasts a long time (gas-guzzling car)

  • Inelastic (inflexible) Demand

  • No substitutes(milk)

  • Necessity(insulin)

  • Inexpensive(safety pin)

  • No durability(pencil)

  • Lasts only a short time(bread)


Demand

Elastic Demand For Cassette Tapes

.

“TR” Test

$2.50x100,000=$250,000

$1.50x600,000=$900,000

+$650,000

D

-$1

Think of “responsiveness” as “flatness”.


Demand

D

“TR” Test

$2 = $30 bil.

$1 = $20 bil.

-$10 bil.

-$1

+25% QD


Demand

Change in “Demand” [curve][“TIMER”]

.

Consumers change

their minds at each

and every price.

Based on good or bad

publicity about OJ.

16 oz. Orange juice = 220 calories

16 oz. Tomato juice = 78 calories


Quantity demanded vs demand

Quantity Demandedvs.Demand

Quantity Demanded [QD] is triggered by a price chg.

The quantities of a good or service thatpeople will purchase at a specific priceat a given time.

Demand [D] is triggered by “TIMER” [non-price].

A schedule of the total quantities of a good or service thatpurchasers will buy at different pricesat a given time.

Demandis abunch of QD’s strung together.


Demand

“Demand Shifters” [TIMER]

1. Taste [direct]

2. Income [normal-direct] [inferior-inverse]

3. Market Size [number of consumers-direct]

4. Expectations [of consumers about future *price-direct,

about future availability-inverse, or about future income–direct.

5. Related Good *Prices [substitutes-direct] [complements-inverse]

D

D1

D1

D2

P1

D1

D3

D2

D2

P

P

P2

P

QD2

Complement

[inverse]

QD1

Substitute

[Direct]

Bread

Butter

Bagels

Change in “D” [curve]

1. Non price change[“TIMER”]

2. Whole “D” curve shifts

[There is a change in “QD” but it is

not caused by a change in “price.”

[QD-”singleprice”; D-”all prices”]

QD3

QD2

QD1


Demand

Change in “Taste”

D1

D2

D3

P

Mini

Skirts

Hip Huggers

Bell Bottoms

QD1

Platforms

QD3

QD2

1. An “Increase in Taste” shifts the D curve right

a. The Nehru jacket came & went in 6 months.

b. Jordache jean demand created by TV

c. Leisure suits and bell bottoms.

d. Technological change may cause

consumer taste to change[slide rules].


Demand

1. "Change in Taste" for Dark Chocolate

Increase in demand for dark chocolate after studies

revealed that there werehealth benefitsfrom eating it.

Scientists have discovered that smokers who ate dark chocolate had

less hardening of the arteries and a lowered risk of blood clots.

D2

D1

P


Demand

Advertising Can Shift “D”[& also impact QD]

D1

D2

$45

QD1

QD2


Demand

2. Change in Income

[Normal-Direct; Inferior-Inverse]

Spam

D2

Steak

D1

Less income

results in

more demand

for spam;

less demand

for steak.

More income

results in

more demand

for steak;

less demand

for spam.

P

QD1

QD2


2 change in income

2. Change in Income

Normal Good – goods whose demand

variesdirectlywith income.

Inferior Good – goods whose demand

variesinverselywith income.

Butter, filet, steel-belts, new clothing & new cars

v.

Margarine, spam, used tires, old clothing & old cars

Demand

For

Steak

Income

Demand

For

Spam


Demand

3. Change in Market Size [Direct]

[Number of Consumers]

D2

D1

P

More demand

for both spam

and steak.

QD1

QD2


Demand

3. Market Size (direct) (# of consumers)

can increase/decrease from

economic decisions, advertising, and

government political decisions (China).

Ex: The large “baby boom” of 1946-64

increased the demand for baby supplies.

An increase in life expectancy increased

demand for for medical care, retirement

communities, and nursing homes.

Increase in # of consumers


Demand

4. Expectations [of consumers]

[about future price, availibility, & income]

If the iPod-Touch is expected to

increase in price from $299 to $399.

D2

D1

iPod-Touch

P

QD1

QD2


Demand

4. Consumer Expectations

car

Consumer expectationsabout future product

price, future availability, & future income.

Ex: When the Korean War broke out in the

summer of 1950, newcar sales boomed(also

washers and refrigerators) out of the

expectation of a production stoppage like

during WWII. None occurred but it was the

expectation that affected new car demand.


Demand

5. Prices of Related Goods

[Substitues-Direct; Complements-Inverse]

D1

D2

D

D1

P1

D2

P

P

P2

Complement

[Inverse]

QD1

QD2

Substitute

[Direct]

Gangsta Grills

Chrysler 300s

Toyotas

MV X PQ


Demand

  • There are three types of goods.

  • Independent goods – price change

  • of one hasno impacton the other.

  • Ex: fishhooks & pantyhose or salt & shoelaces

  • 2. Substitute goods(“competing goods”)

  • - price change of one affects the

  • demand of the other directly.

  • Ex: 7Up & Coke or Miller & Bud

  • 3. Complementary goods(“go together”)

  • - price change of one affects the

  • demand for the other inversely.

5. Prices of Related Goods

D1

D2

QD2 QD1

Peanut butter & jelly

D2

D1

Camera

Film

Cereal&milk Coffee & donuts

QD1 QD2


Demand

[Increasein price of one;increasein “D”of the other]

Substitutes - Direct

Demand

for

Dr Pepper

Price

Of

7UP

D2

D1

D

P

P2

P1

QD QD

QD2QD1


Demand

[Decreasein price of one; increase in the “D” for the other]

Complements - Inverse

P1

P2

QD1QD2

D2

D1

Car Prices

P

QD QD

Gasoline Demand

No change

in price

I’m making more money without dropping my prices.

They are so cheap that

even dogs are buying cars


Demand

Substitutes – Direct

[Increase in price of one;increasein “D”of the other]

Demand for

Microsoft’s Zune

D2

Price of

iPod Video

D1

D

P

P2

P1

QD QD

QD2QD1

1977, Bill was

arrested for

running a stop

sign and driving

without a license.


Demand

Substitutes - Direct

Demand

for

Turkey

Price

Of

Chicken

D2

D1


Demand

Although both monitor & laptop QDs changed, it is still

a “Change in D” for those two, because the QD changes

were not triggered by a change in price.

The price of desktop computers did change so there is a

“Change in QD”for desktop computers.

D1

D2

D

D1

P1

D2

P

P

P2

Complement

[inverse]

QD1

QD2

Substitute

[Direct]

Desktop

Computers

Laptops

Monitor

Prices of Related Goods


Demand

Substitutes - Direct

Price Of

Windows

Computers

Demand

for

Apple

Computers

D2

D1


Demand

.

Substitute/ComplementRelationships

“Substitutes”

D1

D

D2

P1

P

Price

Decreases

Price

Decreases

P2

QD2 QD1

QD1 QD2

[DIRECT]

Hamburgers

Hot Dogs

“Complements”

D

D2

D1

Demand

Increases

Price

Decreases

P1

P

P2

QD1QD2

QD1 QD2

[inverse]

Syrup

Pancakes


Demand

“TIMER”

P

Tastes[direct]

Incomes

-Normal[direct]& Inferior[inverse]

Market Size(# ofconsumers)[direct]

Expectations of consumers about

[futureprice-direct;future

income [direct];andavailability[inverse]

Related Good Price Changes

[substitutes-direct;complements-inverse]

Helmets


Demand

Change in QD [“Change in “price”]

Increase in “QD”

[caused by a “decrease in price”]

Decrease in “QD”

[caused by an “increase in price”]

D

D

1. Price change

2. Movement

3. Point to point

[“Snap shot of 1 pt in time]

P1

P2

P2

P1

QD1

QD2

QD2

QD1

Change in “D” [“TIMER”]

D2

D1

D1

1. Non-price

2. Whole curve

3. Shift

[“Time passes”]

D2

P

P

“Decrease in D”

“Increase in D”

What could cause an “increase in Demand?” 5.Expectations of a shortage

1. Increase in taste 6. Expectations of a price increase

2 .Increase in income [normal good] 7. Expectations of positive future income

3. Decrease inincome [inferior good]8. Incr in price of a substitute for product “X”

4. Increase in market size[# of consumers] 9. Decr in price of acomplement of product “X”


Demand

  • Change in D [curve]

  • [non-price change/shift/whole curve]

  • 5 Demand Shifters [“TIMER”]

  • 1. Taste [direct]

  • 2. Income [normal - direct] [inferior - inverse]

  • 3. Market Size [number of consumers-direct]

  • 4. Expectations [price, income, & availability]

  • 5. Related Good Price changes

  • [substitutes - direct] [complements - inverse]

Change in QD

[price change/movement/pt to pt]

D2

D1

D3

D

P1

P2

QD3QD1QD2

QD1 QD2

[“Moving” along thecrab demand curve”

because of a crab price change]

“Shifting the crab demand curve”

+/- QD/D

___ ___ 1. Crab sales are affected by a drop in crab prices.

___ ___ 2. An increase in income causes the demand curve for crab to shift.

+

QD

D

+


Demand

+/-D/QD

Graph The Black Boldfaced Items

___ ___ 1. A population increase affects sales of Pepsi Colas.

___ ___ 2. Consumer incomes in the city of Plano decrease,

with the result that jewelry sales are affected.

___ ___ 3. A camera store has a sale that features 25% off the price of all cameras.

___ ___ 4. Texas imposes a 15% luxury tax on the sale of sailboats.

___ ___ 5. A frost in Florida destroys 60% of the orange crop and increases

expectationsabout a future price increase of oranges.

___ ___ 6. Consumers expect the prices of digital camerasto decreasenext month.

___ ___ 7. The sale of DVDs is affected by a 20% increase in the price of DVD players.

___ ___ 8. The sale of buns is affected by a 20% decrease in the price of

hamburger meat.

___ ___ 9. The sale of Kangaroo meat in Europe [Roo Steak] is affected

by a 25% increase in the price of beef.

___ ___ 10. Dunkin Donutslowers the price of donuts& experiences a change in sales.

+

D

-

D

QD

+

-

QD

D

+

-

D

-

D

D

D1

P2

P1

[Complements - INVERSE]

DVD

Players

QD2 QD1

DVDs

+

D

D1

D

[Complements - INVERSE]

P1

P2

Hamburger

meat

Buns

+

D

QD1 QD2

D

D1

[Substitutes -DIRECT]

P2

P1

Beef

Kangaroo meat

QD2 QD1

+

QD


Demand

Change in QD

D

Change in QD

Price Change

Point to Point

Movement

P1

P2

QD1 QD2

D

[INVERSE]

P2

P1

What is not held constant

in these two graphs?

Price

QD2QD1

“Change in Demand”

D1

D2

D1

D2

P

P

Do not confuse these

two with “Chg in QD”

Q2 Q1

Q1 Q2

Change in Demand

Non-Price Change

Whole Curve

Shift


Demand

[D – “TIMER;QD – price change[inverse]

__1.Which will cause an “Increase in D”for MP3 Player phones?

a. increase in incomec. increase in the price of MP3 Player phones

b. decrease in income d. decrease in the price of MP3 Player phones

___2. Which will cause an“Increase in QD” for MP3 Player phones?

a. decrease in incomec. decrease in the price of MP3 Player phones

b. increase in incomed. increase in the price of MP3 Player phones

___3. Which will cause a“Decrease in D” for Projectors?

a. increase in the price of projectors c. decrease in # of consumers

b. decrease in the price of projectors d. increase in projector taste

___4. Which will cause a“Decrease in QD”for Projectors?

a. increase in the price of projectorsc. decrease in # of consumers

b. decrease in the price of projectorsd. increase in projector taste

MP3 Player Phone

[stereo sound,downloadable

sound games and ring tones]

A

C

C

A


Qd d practice quiz s nickers

QD & DPractice Quiz[Snickers]

1. What would cause an “increase in QD” for Snickers?

a. increase in price of Snickers b. decrease in price of Snickers

c. decrease in income d. increase in number of consumers

2. What would cause an “increase in D” for Snickers?

a. increase in taste b. decrease in price of Snickers

c. decrease in incomed. increase in the price of Snickers

3. What would cause a “decrease in QD” for Snickers?

a. increase in taste b. decrease in price of Snickers c. increase in price of Snickers

4. What would cause a “decrease in D” for Snickers?

a. decrease in income b. increase in taste c. decrease in price of Snickers

5. An “increase in the price of Butterfingers would

cause a(n) (increase/decrease) in (QD/D) for Snickers?


Ns 1 10

NS 1-10

1. (Demand/Supply) is identified as quantities consumers are willing

and able to buy at various prices during a given time period.

2. The law of demandsays thatprice & QD are (directly/inversely)related.

3. The most important variable influencing decisions to produce and

purchase goods is (technique/price). (Price/income) is not held

constant when moving along a stable demand curve.

4. Income effect-theincrease or decrease in purchasing power

brought on by a change in (taste/market size/price).

5. Substitution effect – tendency to substitute a (higher/lower)

-priced product for a more expensive product.

6. Diminishing marginal utility – utility, or (determination/anger/satisfation)

decreases as more of the same product [Snickers] is consumed.

7. The law of demandrefers to a(movement/shift)along a demand curve.

8. Substituting chicken as the price of steak goes up is an example

of the (income/substitution) effect.

9. When the price of caviar falls, the purchasing power of our money income

rises & thus permits us to purchase more caviar. This is the (income/substitution) effect.

10. The demand(curve/schedule)is anumerical tabulationshowing QD at each price.

The demand(curve/schedule)is agraphical representationof the law of demand.


Ns 11 20

NS 11 - 20

11. Elasticity ofdemand–the way price affects(attitude/quantity/market size).

12. (Inelastic/Elastic) demand – demand that is very responsive to price.

[A small price increase causes a large decrease in quantity demanded.]

13. (Inelastic/Elastic) demand-when a change in price has little impact on QD.

14. The 3-item test for elastic demand are substitutes, luxury items,

and (inexpensive/expensive) items.

15. The 3-item testfor inelastic demand are no substitutes,

necessities, and (inexpensive/expensive) items.

16. Expensive cars have (inelastic/elastic) demand.

17. Pepsi Cola has (inelastic/elastic) demand.

18. Insulin has (inelastic/elastic) demand.

19. The elastic demand curve is more (horizontal/vertical).[much change]

20. The inelastic demand curve is more (horizontal/vertical).[not much change]


Ns 21 26

NS 21-26

21. With the invention of the calculator, the demand curve for the

slide rule (increased/decreased).

22. When Forest Gump went to China & the U.S. followed by

opening up relations with China, the demand curve for

Coke (increased/decreased).

23. An increase in income would (increase/decrease) the demand

for used clothing. [inferior good]

24. A decrease in income would (increase/decrease) the demand

for lobster. [normal good]

25. A decrease in the price of product X[lumber] will (incr/decr)

the demand for the complementaryproduct Y. [nails]

26. After Brooke Shields[15] did her national TV ads[“Nothing comes

between me and my Calvin’s”], the “D” curve moved (right/left).

$45


Ns 27 38

NS 27-38

27. An increase in the price of Pepsi causes the

demand curve for Coke to move to the (right/left).

28. If there is a sale on shirts, the demand curve for ties will move

to the (right/left).

29. If a man’s workplace is about to close down, his demand

curve for major purchases would move to the (right/left).

30. If a cure for lung cancer were found, the demand curve for

cigarettes would move to the (right/left).

31. If the price of pancakes decreases, the demand

for syrup, a complement, will (increase/decrease).

32. If the price of butter decreases, the demand formargarinewill (incr/decr).

33. A “change in QD” is caused by (price change/TIMER)[a “movement”]

34. A “change in D” is caused by (price change/TIMER) [a “shift”]

e


The end

“Econ, Econ”. Let

tell you about econ.

The End


Demand

1. Madonna gave a concert at the AAC after doubling the ticket

priceand experiencing a change in anticipated attendance.

2. A decrease in tastecauses the demandforlobster to shift.

3. A 20% increase in the price of Pepsiaffect the sale ofCoke.

4. Consumers expect the price of cell phones to increase 25% next month.

5. The sale ofFord F150sis affected when the U.S. begins trading with Cuba.

6. New autos decrease in price by 20% & the sale of gasoline is affected.

7. Victoria’s Secret increases the price of its thongs by

40% and experiences a change in the volume of sales.

8. Britney Spears triples the price of her album,

“Oops, I flunked Econ Again,”and sales are affected.

9. A drought in Texas destroys 40% of the state’s peaches & increases consumer expectations about a future price increase of peaches.

10. A 15% decrease in the price of motorcyclesaffect the sale ofhelmets.

Taste [direct]

Income [normal-direct] [inferior-inverse]

Market Size [# of consumers-direct]

Expectations [price-direct] [income-direct] [availability-inverse]

Related Good Price Changes [subs-direct] [complements-inverse]

1.–QD 2. –D 3. +D 4.+D 5.+D

6.+D 7.–QD 8.–QD 9.+D 10.+D


Demand

1. Christina gave a concert at the AAC after loweringthe ticket

priceand experiencing a change in anticipated attendance.

2. An increase in tastecauses the demand curve forlobster to shift.

3. The sale of cokeis affected by a20% decrease in the price of Pepsi.

4. Consumers expect the price of XBOX to decrease 25% next month.

5. The sale ofDr Pepperis affected when the U.S. goes to war with China.

6. New SUVs decrease in price by 30% & the sale of gasoline is affected.

7. Victoria’s Secret decreases the price of its teddies by

50% and experiences a change in the volume of sales.

8. The Spice Girls lower the price of their album, “Oops,

We Actually Passed Econ,”and sales are affected.

9. A freeze in California destroys 70% of the state’s oranges and increases consumer expectations about a future price increase of oranges.

10. A 50% increase in the price of breadaffect the sale ofbagels.

Taste [direct]

Income [normal-direct] [inferior-inverse]

Market Size [# of consumers-direct]

Expectations [price-direct] [income-direct] [availability-inverse]

Related Good Price Changes[subs-direct] [complements-inverse]

1.+QD 2.+D 3. -D 4.-D 5. -D

6.+D 7.+QD 8.+QD 9.+D 10.+D


Demand

Review of Demand


Demand

Law of Demand [Change in QD]

D

Reasons For Downsloping “D” Curve

1. Income Effect –current buyers buy more.

2. Substitution Effect– new buyers now purchase.

3. Diminishing MarginalUtility - because buyers

of successive units receive less marginal utility,

they will buy more only when the price is lowered.

[8GB]

iPhone

$399.00

[with 2 yr contract]

Change in QD

1. Price change

2. Movement

[up/down the demand curve]

3. Point to point [along the curve]

Price

QD

$250.00

Inverserelationship

QD1

QD2

“D” refers to the “whole curve”.[“all prices”]

“QD” refers to a “point on the curve”

based on a “particular price.”


Demand

“Demand Shifters”[“TIMER”]

1. Taste [direct]

2. Income [normal-direct] [inferior-inverse]

3. Market Size [number of consumers-direct]

4. Expectations [of consumers about future price-direct,

about future availability-inverse, or about future income–direct.

5. Related Good Prices [substitutes-direct] [complements-inverse]

D

D1

D1

D2

D3

P1

D1

D3

D2

P

P

P2

P

Complement

[inverse]

QD1QD2

Substitute

[Direct]

PS3

Games

for PS3

XBOX

Changes in “D” [curve]

1. Non price change [“TIMER”]

2. Whole “D” curve shifts

[There is a change in “QD” but it is

not caused by a change in “price.”

[QD-“singe price”; D-”all prices”]

QD3

QD2

QD1


Demand

1."Change in Taste"

[Direct]

A decrease in taste

forvideos results in a

decrease in demand.

An increase in taste

for DVDs results in an

increase in demand.

D2

D1

D3

P

QD3

QD1

QD2


Demand

2. Change in Income

[Normal-Direct; Inferior-Inverse]

Used Cars

New Cars

D2

D1

Less income

results in

more demand

for used cars;

less demand

for new cars.

More income

results in

more demand

for new cars;

less demand

for used cars.

P

QD1

QD2


Demand

3. Change in Market Size [Direct]

[Number of Consumers]

This is what we told one billion Chinese, as new potential

consumers, when we opened trade relations with them in 1972.

D2

D1

P

New Cars

More demand

for both normal

& inferior goods

QD1

QD2

Used Cars


Demand

4. Expectations [of consumers]

[about future price, availibility, & income]

If Steve Jobs responds to iRate customers who

bought the iPhone at $599 and says, “iSorry,

we will raise the price back to $599 in 3 weeks.”

$399

D2

D1

Buy it now to save money.

iPhone

P

QD1

QD2


Demand

4. Expectations [of consumers]

[about future income]

Let’s say that we are coming out of recession & consumers

feel secure about their jobs. [Positive future income]

D2

D1

P

QD1

QD2


Demand

4. Expectations [of consumers]

[about future income]

Let’s say that we are going into a recession and consumers

don’t feel secure about their jobs. [Negative future income]

D1

D2

P

QD2

QD1


Demand

5. Prices of Related Goods

[Substitutes-Direct; Complements-Inverse]

D1

D2

D

D1

P1

D2

P

P

P2

QD2

Complement

[Inverse]

QD1

Substitute

[Direct]

Cereal

Pop Tarts

Milk


Demand

D

D1

Dr Pepper

Coke

P1

P2

D2

Substitutes - Direct

D

D2

D1

Motorcycles

P1

P2

Helmets

QD1QD2

Complements - Inverse


Demand

Change in QD

D

Change in QD

Price Change

Point to Point

Movement

P1

P2

QD1 QD2

D

[INVERSE]

P2

P1

What is not held constant

in these two graphs?

Price

QD2QD1

“Change in Demand”

D1

D2

D1

D2

P

P

Do not confuse these

two with “Chg in QD”

Q2 Q1

Q1 Q2

Change in Demand

Non-Price Change

Whole Curve

Shift


Demand

[D – “TIMER;QD – price change[inverse]

[Revised from previous]

__1.Which of the following will cause an “Decrease in D”for iPod nanos?

a. increase in incomec. increase in the price of iPod nanos

b. decrease in income d. decrease in the price of iPod nanos

___2. Which will cause an“Decrease in QD” for iPod nanos?

a. decrease in incomec. decrease in the price of iPod nanos

b. increase in incomed. increase in the price of iPod nanos

___3. Which of the following will cause a“Increase in D” for HDTVs?

a. increase in the price of HDTVsc. decrease in # of consumers

b. decrease in the price of HDTVsd. increase in HDTV taste

___4. Which of the following will cause a“Increase in QD”for HDTVs?

a. increase in the price of HDTVsc. decrease in # of consumers

b. decrease in the price of HDTVsd. increase in IPOD taste

B

D

D

B


Qd d p ractice q uiz revised

QD&DPractice Quiz[“Revised”]

1. What would cause a “decrease in QD” for KitKats?

a. increase in price of KitKats b. decrease in price of KitKats

c. decrease in income d. increase in number of consumers

2. What would cause a “decrease in D” for KitKats?

a. increase in taste b. decrease in price of Kitkats

c. decrease in incomed. increase in the price of KitKats

3. What would cause an “increase in QD” for KitKats?

a. increase in taste b. decrease in price of KitKats c. increase in price of KitKats

4. What would cause an “increase in D” for KitKats?

a. increase in # of consumers b. decrease in taste b. decrease in price of KitKats

5. A “decrease in the price of Reese’s would

cause a(n) (increase/decrease) in (QD/D) for KitKats?


Demand

.

Elastic/InelasticDemand

Go over Total

Receipts Test

For Elastic &

Inelastic


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