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Shifts in Demand. Mr. Barnett University High 2012-2013 AP Microeconomics . Demand – schedule of quantities of goods or services that will be purchased at various prices, at a specified time , all other things held constant

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shifts in demand

Shifts in Demand

Mr. Barnett

University High

2012-2013

AP Microeconomics

slide2

Demand – schedule of quantities of goods or services that will be purchased at various prices, at a specified time, all other things held constant

    • Those “things” being held constant are the determinants of demand
      • Number of consumers
      • Income normal goods
      • Income inferior goods
      • Consumer tastes and preferences
      • Prices of related products – Substitutes
      • Prices of related products – Complements
      • Expected future prices by consumer
      • Expected future income by consumer
  • As we all know, the demand of goods or services change over time
  • These changes cause shifts in the demand curve
    • An increase in demand is shown by a shift to the right
    • A decrease in demand is shown by a shift to the left
equilibrium
Equilibrium
  • If we put up a supply and demand curve at the same time …
    • Equilibrium – when market price has reached level where quantity supplied equals quantity demanded
    • Equilibrium price – price where quantity supplied meets quantity demanded
    • Equilibrium quantity – quantity supplied and quantity demanded at the equilibrium price
  • Shifts in curves will change equilibrium price/quantity
number of consumers
Number of consumers
  • Can change because of various reasons
    • Population
      • If 5 new families move into your neighborhood
      • If the local school begins classes
    • Weather
      • An incredibly hot September
      • A extremely cold November
income normal goods
Income Normal Goods
  • Number of consumers increases
    • Shift right
  • Number of consumers decreases
    • Shift left
income normal goods1
Income Normal Goods
  • Normal good – a good where an increase in income leads to an increase in demand
  • Inferior good – a good where an increase in income leads to a decrease in demand
  • As people’s incomes increase, they tend to buy more normal goods
  • As people’s incomes decrease, they tend to buy more inferior goods
income normal goods2
Income Normal Goods
  • Increase in income - impact on normal goods
    • Shift right
  • Decrease in income – impact on normal goods
    • Shift left
  • Increase in income – impact on inferior goods
    • Shift left
  • Decrease in income – impact on normal goods
    • Shift right
preferences tastes
Preferences & Tastes
  • When consumers have a change in preference or tastes, the demand for the good changes accordingly
    • Oprah’s book club
    • Medical studies
preferences and tastes
Preferences and Tastes
  • Increase in preference
    • Shift right
  • Decrease in preference
    • Shift left
substitutes
Substitutes
  • Prices of related products – Substitutes
    • As price of product x rises, its quantity demanded decreases
    • Demand for product y increases
    • As price of product x falls, its quantity demanded increases
    • Demand for product y decreases
substitutes1
Substitutes
  • Prices of related products – Complements
    • As price of product x rises, its quantity demanded decreases
    • Demand for product y decreases as well
    • As price of product x falls, its quantity demanded increases
    • Demand for product y increases as well
substitutes2
Substitutes
  • Expected future prices by consumer
    • If people expect prices to go up, demand _____
      • Increases; shift to the right
    • If people expect prices to go down, demand _____
      • Decreases; shift to the left
  • Expected future income by consumer
    • If people expect their income to go up, demand _____
      • Increases; shift to the right
    • If people expect their future income to go down, demand _____
      • Decreases; shift to the left