ECONOMICS CHAPTER 3, SECTION 2

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ECONOMICSCHAPTER 3, SECTION 2

• Changes in Demand

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I. Demand Shifts

• A. With the passage of time, factors other than
  price (non-price factors) can affect demand for a
  good or service.

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I. Demand Shifts

• B. The result of non-price factors affecting
  demand is that the entire demand curve shifts
  either to the right or to the left.

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I. Demand Shifts

• P
• Q

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I. Demand Shifts

• C. This means that quantity demanded changed at
  every price.

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II. Increases and Decreases in Demand

• A.
• An INCREASE in demand shifts the entire demand
  curve to the RIGHT.

• I. Demand Shifts
• P
• D1 D2
  
  
  
  
• Q

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II. Increases and Decreases in Demand

• B.
• A DECREASE in demand shifts the entire demand
  curve to the LEFT.

• I. Demand Shifts
• P
• D1
• D2
• Q

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III. Determinants of Demand

• A. There are five non-price factors which
  determine demand for a good or service
• 1. Consumer Taste and Preference
• 2. Market Size
• 3. Income
• 4. Prices of Related Goods
• 5. Consumer Expectations

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1. Consumer Taste and Preference

• Consumers taste and preference for comfort,
  quality, trends, holidays, seasons, etc. can have
  an effect on demand.
• Ex.

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2. Market Size

• Changes in the size of the market can have an
  effect on demand. Three factors can change
  market size

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2. Market Size

• A. Decisions made by private businesses,
  ex. Production decisions, advertising campaigns,
  hiring practices, use of celebrities

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2. Market Size

• B. Government policies, ex. Regulations/laws,
  trade with foreign countries

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2. Market Size

• C. New technology, ex.

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3. Income

• Changes in consumers income can have an effect
  on demand.
• Ex. Losing a job, getting a pay raise, being
  promoted

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4. Prices of Related Goods

• The demand for a good or service can be affected
  by the prices of related goods
• There are two types of related goods

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4. Prices of Related Goods

• A. Substitute goods are goods that can be used to
  replace a similar good
• Ex.
• P of original good increases, D for substitute
  good increases
• P of original good decreases, D for substitute
  good decreases

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4. Prices of Related Goods

• B. Complementary goods are goods that are usually
  used together
• Ex.
• P of original good increases, D for complement
  good decreases
• P of original good decreases, D for complement
  good increases

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5. Consumer Expectations

• Expectations of ones future income can have an
  effect on demand.
• Ex.