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Demand 2

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  1. How is a shift in demand different from a change in quantity demanded? • QD is the amount of a good or service a consumer is willing and able to purchase at each particular price at any given time. • QD is notated by each separate point on the demand curve. • A shift in demand is shown as an entirely new demand curve, which is notated QD2. Demand 2

  2. Demand 2

  3. How is a shift in demand different from a change in quantity demanded? • The things that cause a shift in demand are called the determinants of demand. • Consumer tastes and preferences • Market size • Income • Prices of related goods (substitute and complementary) • Consumer expectations Demand 2

  4. Demand 2 • Elasticity of Demand • Is determined by how much a change in price affects a change in the quantity demanded for a product. • A change in price DOES NOT, on its own, cause a shift in demand

  5. Demand 2 • A good is elastic if: • The product is not a necessity • There are readily available substitutes • The product’s cost represents a large portion of the consumer’s income

  6. Total Revenue and Elasticity of Demand • Total revenue ( or total receipts) is simply the price of the product times the number sold of the product (TR=P x QD) • If a price change causes total revenue to drop for a particular product, that product has an elastic demand • If the total revenue rises despite a change in price, demand for that product is inelastic Demand 2