PART 3 CONSUMER ECONOMICS WK 4 - 1:DEMAND CHANGES

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PART 3 CONSUMER ECONOMICS WK 4 - 1DEMAND CHANGES
AED 200 AGRICULTURAL ECONOMICS
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PART 3 CONSUMER DECISIONS

• WK 3-3 CONSUMER BEHAVIOUR UTIL
• WK 3-4 ISO-UTIL CURVES Budget LINES
• WK 3-5 INDIVIDUAL MARKET DEMAND
• WK 4-1 CHG IN DEMD QUANT DEMANDED
• WK 4-2 PRICE ELASTICITY OF DEMAND
• WK 4-3 INCOME CROSS ELASTICITY
• WK 4-4 CONSUMER SURPLUS AGG DEMAND
• WK 4-5 MIDTERM 1

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WK 4 - 1DEMAND CHANGES
When the student has completed this lesson he/she
should be able to
1. Explain a change in quantity demanded in terms
of concept cases causes consequences and
graphs.
2. Explain a change in demand in terms of
concept cases causes consequences and graphs.
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A. DEMAND Equation PRICE -F ( DEMAND)
Wk 4 - 1demand Changes
I. Review

• B. Demand Schedule A Graph Or Table That Show
  How Much Will Be Bought At Each Price Level

Quantity Of Good X
All Consumers
Consumer A
Consumer B
Price
3
9
12
.50
6
21
15
.25
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C. Demand Curves
Wk 4 - 1demand Changes
Consumer A
All Consumers
Consumer B
Da
P
P
P
D1
Db
.50





.25

Q
Q
Q
3
6
9
15
12
21
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D. Definition Of Demand
Wk 4 - 1 Demand Changes

• AMOUNT Of A Good Or Service That A Consumer
  Is WILLING And ABLE To Buy In A Given
  TIME Period Within A Relevant Range Of PRICES
  

E. Demand Concepts
1. Slope Negative 2. Relationship
Inverse Between Price Demand 3.
Shape Linear
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WK 4 - 1DEMAND CHANGES
F. UNDERLYING PRINCIPLE

• Law Of Diminishing Marginal Utility
• The More We Buy Of An Item, The Less
  Satisfaction We Get From Each Additional Unit,
  The Less We Are Willing to Pay

G. Degree Of Slope 1. lt1 Inelastic Quantity
Is Not Sensitive To Price Changes 2. 1 Unitary
Quantity Is Indifferent To Price Changes 3.
gt1 Elastic Quantity Is Sensitive To Price
Changes
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Wk 4 - 1Demand Changes

• Change In Quantity Demanded
• Concept
• Chart
• Cases
• Cause
• Consequence(Outcome)

• Change In
• Demand
• Chart
• Cases
• Cause
• Concept
• Consequence(Outcome)

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II. Change In Quantity Demanded
74
Explain A Change In Quantity Demanded
1
Obj

• A. Concept

A Movement Along A Given Demand Curve Due To
Output Price Change
B. Chart
Price
D1
A
Pa
B
Pb
D1
Quantity
Qa
Qb
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C. Cases (Direction)
Explain A Change In Quantity Demanded
74
1
Obj
P
B
P2

• 1. Move Up The Demand Curve Due To Rise In
  Product Price

A
P1
Q
P
2. Move Down The Demand Curve Due To A Decrease
In Product Price
A
P1
B
P2
Q
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D. Cause
Explain A Change In Quantity Demanded
74
1
Obj

• A Change In The Product Price Determines The
  Movement On A Given Demand Curve, Not The Level
  Of The Demand Curve

E. Consequences (Outcome)
1. A Smaller Quant Is Bought At A Higher Price
2. A Larger Quant Is Bought At A Lower Price
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III. Change In Demand
70
Explain A Change In Demand
2
Obj
A. Concept
gtgtMovement (Shift) Of The Demand Curve
B. Chart
D2
P
D1
D2
D2
D1
D2
Q
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C. Cases (Direction)
70
Explain A Change In Demand
2
Obj

• 1. Demand Curve Can Shift Right

P
D1
D2
D1
D2
Q
2. The Demand Curve Can Shift Left
D1
P
D2
D1
D2
Q
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D. Cause
71
Explain A Change In Demand
2
Obj

• 1. Economic
• A. Increases In Income Will Shift The Demand
  Curve To The Right

B. Increase In The Price Of Substitutes Will
Shift The Demand Curve To The Right
C. Decrease In The Price Of Compliments Will
Shift The Demand Curve To The Right
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2. Non-Economic
73
Explain A Change In Demand
2
OBJ

• A. Population
• 1. Size More People Will Shift The Curve To
  The Right

2.Composition
A) Ethnicity
B) Age
C) Type Of Households
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B. Preferences
71
Explain A Change In Demand
2
OBJ

• Nutrition Health

2. Food Safety
3. Life Styles
4. Technology
5. Advertising
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E. Outcome Of A Shift To The Right
71
Explain A Change In Demand
2
OBJ

• 1. Consumer Pays More For Same Quantity

2. Producer Sells More For The Same Price
P
D2
P
B
D1
P2
A
B
P1
P1
A
Q
Q1
Q2
Q1
Q
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WK 4 - 1DEMAND CHANGES SUMMARY
A movement along a given demand curve due to
output price chg
Movement (shift) of the demand curve
1. Move up demand curve due to rise in product
price2. Move down demand curve due to a dec in
product price
1. Demand curve shifts right 2. Demand curve
shifts left
1. Economic
Inc, Pr of Subs, Pr of Comp
A change in the product price
Pop, Pref, Life Style, Adv
1. A smaller quant is bought at a higher price
1. Consumer pays more for same quantity
2. A larger quant is bought at a lower price
2. Producer sells more for the same price
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SELF TEST DEMAND CONCEPTS

• MOVE DOWN DEMAND
• SHIFT DEMAND RIGHT
• MOVE UP DEMAND
• SHIFT DEMAND LEFT

___ 1. DEC IN OUPUT PRICE___ 2. LESS PEOPLE___
3. CHANGE IN DEMAND ___ 4. ADVERTISING ___ 5.DEC
IN SUBST PRICE ___ 6. SAME QUANT PAY MORE ___ 7.
INC IN OUTPUT PRICE ___ 8. CHG IN QUANT
DEMANED ___ 9. THE OTHER WHITE MEAT ___10.
DECLINE IN INCOME ___11. COMPLIMENT PRICE DECLINE
A
D
B
D
B
D
B
C
A
C
B
D
D
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Next Topic

• Price Elasticity