Demand

1
Demand
2

Oh, I understand. It is a matter of
supply and demand, and you da man.
3
Demand and Supply

• Why do roses cost more on Valentines Day?
• Why do TV ads cost more during the Super Bowl
  (2.5 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
4
.
Big Demand, Small Supply of great athletes
Michael Young, 88.5 million for seven years,
Michael gets paid 800,000 per month.
Dirk Nowitski, 12,584,688
Maria Sharapova, worlds best paid female
athlete at 18.2 million
Because of so much demand for tickets for
game one of the NBA finals at the AAC, 35
nose-bleed tickets were going for 350 65 seats
were going for 550, and courtside seats were
going for 6,500. This was caused by Big Demand.
One out of every 8,000 high school basketball
players goes on to play in the NBA.
5



Individual Demand
To
Market Demand
JO
Mo
Bo
D
D
D2
D
D
Total

3
3


3
3
2
2
2
2
26
40
35
30
115
45
115
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.
6

Ill buy at 5 cents but not at 10 cents If they
are made from real lemons.
.10
Not much business so Im going to lower my
price to 5 cents.
D
.10
.5
QD2
QD1
Movement, just movement, no shift
Change in QD Price change Point to
point Movement
Lower the price increase QD
7
Demand willingness to buy
Change in QD price change, point to point
movement
Demand quantities of products that consumers
are willing and able to buy at various prices
during a given time period.
Because Im willing WILLING, and Im able
ABLE.
D
P1
Click here once
P2
D2
D1
D3
QD1
QD2
So, lets put Prince on the D curve.
QD1
QD2
QD3
Change in Demand (curve)
Demand is the whole curve all prices We
demand something because we expect it to be
useful to us in satisfying our wants.
8
D
P1
Demand is the whole curve all prices We
have demand for something because we expect it
to be useful to us in satisfying our wants.
Demand is constantly changing because of price
non-price factors such as TIMER. Taste
Income Market size Expectations (future
income, price, availability) Related good
price changes
P2
QD1
QD2
iPhone
D2
D1
D3
Change in Demand (curve)
QD1
QD2
QD3
9
Goods That Have Less Demand Than Years
Ago

• M. Jackson glove
• Power Rangers
• Parachute pants
• Old Jellies
• Dalmatian puppies
• Furbys
• Pogs
• Typewriters

40 million were sold
M. Jacksons popularity
10

Name Goods That Have Greater Demand Today
1. MP3 Players 2. Cell Phones 3. New Jellies 4.
LCD monitors 5. DVD players 6. Nintendo DS 7.
PS3 8. Digital cam. 9. XBOX 360
10. Plasma TVs 11. PSPs 12. Seven jeans 13.
Spiked hair 14. Portable DVDs 15. iPhone 16. iPod
Video 17. Bratz Dolls 18. Wii
iPhone
RAZR
Crocs
Hoodies
Playstation 3
Wii
iPod video
XBOX 360
11
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 specified time period
other things being equal
QD how much will be purchased at a specific
price date.
12
.
Law of Demand for Coca Cola
Lets also buy coke for just .10.
As price decreases QD increases
Wow, fifty cents! Ill have two.
Wow, ten cents! Ill also have 2.
D
1
.50 .10
At .10, two for me too.
QD1 QID2 QD3
.50
Inverse
Price
QD
If Coke, Pepsi, Dr. Pepper, 7-Up, Sprite, Root
Beer, Mountain Dew were all selling for 1,
who would buy Coke?
OK, Here you are, one of these guys
How many of you non-Coke drinkers would buy Coke
for just .50?
OK, Here you are, the added buyer coke drinkers.
Now, how many of you non-Coke drinkers would buy
Coke for just .10?
And, here are even more added buyer coke
drinkers.
We have demonstrated the income effect.
Lower prices increased income so more was
consumed. And the substitution effect,
consumers of higher priced soft drinks bought
the lower priced Coke.
13
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
Marginal Utility - because buyers of
successive units receive less marginal utility,
they will buy more only when the price is
lowered.
iPod Touch 8 GB
299.00
Change in QD 1. Price change 2. Movement
up/down the demand curve 3. Point to point
along the curve
Price
QD
199.00
Inverse relationship
QD2
QD1
D refers to the whole curve. all
prices QD refers to a point on the
curve based on a particular price.
14
Demand
Demand Can Increase or Decrease
Change in Demand TIMER
6 5 4 3 2 1 0
P
D2
Demand Schedule
D1
D3
Individual Demand
P
Qd
Increase in Demand
5 4 3 2 1
10 20 35 55 80
Price (per bushel)
Decrease in Demand
Q
2 4 6 8 10 12 14
16 18
Quantity Demanded (bushels per week)
Demand is a whole bunch of QDs strung together.
15
.
The Model T
850
260
QD2 600,000
QD1 6,000
Law of Demand statement Every time I reduce the
charge for our car by 1, I get a thousand
new buyers.
You can have it in any color you want as long as
its black
Production went from 6,000 a year to 600,000.
16
Where is the Mistake?
Well, everyone knows that a price increase
decreases the demand.
Forget it!
OK, I demand that you fix me a glass right now.
Why did you increase your price, Oliver?
Lemonade .5 per glass
Lemonade .15 per glass
.15
17
Where is the Mistake?
Well, everyone knows that a price increase
decreases the QD.
OK, I demand that you fix me a glass, right now.
Why did you increase your price, Oliver?
Forget it!
QD.
Lemonade .5 per glass
Lemonade .15 per glass
.15
D
.5
QD particular price point on curve D QD at
every price whole curve shifts all
prices
.15
QD1
QD2
18
Where is the Mistake?
Well, everyone knows that a price increase
decreases the QD.
OK, I demand that you fix me a glass, right now.
Why did you increase your price, Oliver?
Forget it!
QD.
Lemonade .5 per glass
Lemonade .15 per glass
.15
D
.5
QDparticular price point on curve D QD at
every price whole curve shifts all prices
.15
QD1
QD2
19
.
Reasons For Downward Sloping D Curve
1. Income Effect
D
- At lower prices, current buyers
are richer and will buy more.
2. Substitution Effect
- Buyers of higher priced substitutes
will buy the lower priced substitutes
And I normally drink RC Cola, but not if I can
get a 10 cent Dr Pepper.
Dr. Pepper is only 10 cents. I normally buy 7-Up
or Big Red.
20
.
American Beats The Japanese Tsunami
66 Hot Dogs in 12 minutes v. 63
21
Hot Dog Winner
Joey Jaws Chestnut and 66 hot dogs
Sonya Thomas 37 dogs
Joey Chestnut, at 215 pounds before the contest
(and 235 afterwards) won the Nathans Famous
Hot Dog contest with 66 hot dogs in 12
minutes. This contest has been held every year
on July 4 since 1916. Typically, a single
Nathans hot dog is very filling and 4 of them
are an invitation to disaster. At 320
calories per dog, he put 21,120 calories
into his stomach in twelve minutes, thus
the 20 extra pounds.
22
Chestnut Wins
Competitors receive credit for anything in their
mouths at the 12-minute mark, provided they can
swallow it.
Once the contest ended, the runner-up suffered a
reversal -- competitive eating-speak for barfing
leading to a deduction from his final total.
Takeru Kobayashi finished with 63 HDBs (hot dogs
and buns eaten) in his best performance ever.
"The judges found a quarter of a hot dog in his
cup," said Patrick Chestnut, Joey's older brother
who witnessed the spew from the front row as he
cheered on his brother. "If that's not grounds
for disqualification, what is?" Gersh Kuntzman,
the judge who ruled in Kobayashi's favor, saw it
differently. "The effluvia never touched the
table," Kuntzman said, a distinction he claimed
was part of the International Federation of
Competitive Eating's official rules. "When the
hot dog came up, and some of it came out his
nose, Kobayashi sucked it back down. To me,
that's the testament of a champion and great
athlete."
23
His Reward
Symbolic of gastronomic greatness
Joey ate the equivalent of 1 dog every 10.9
seconds. For his victory, he received the
coveted mustard-yellow champions belt and a
one years supply of hotdogs from Nathans. The
man he defeated earned 150,000 in one year
for similar contests, including 25,000 for a
winning appearance at the Glutton Bowl, in
which he consumed 18 pounds of cows brains.
24
.
Sonya Thomas The Black Widow at 98
pounds sets the Female Record at 37 in 05
Other eating accomplishments of Sonya at
competitive eating contests are these 5.75 lbs
deep fried asparagus in 9 minutes.

• 11 pounds of cheesecake in 9 minutes
• 167 Chicken Wings in 32 minutes
• 65 hard boiled eggs in 6 minutes, 40 sec.
• 5 pounds of fruitcake in 10 minutes
• 7 (¾ pound) hamburgers in 10 minutes
• 9 pounds crawfish jambalaya in 10 minutes
• 36 dozen Acme Oysters in 10 minutes
• 23 pulled pork sandwiches in 10 minutes
• 7 (3/4 lb) turkeys - 12 minutes
• 43 soft tacos - 11 minutes
• 89 meatballs - 12 minutes

25
Graphing The Demand Curve
Price Change, Point to Point Movement
Picture of Law of Demand
26
Elastic or 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
27
11. Elasticity of D the way price affects
QD.12. Elastic - QD that is very responsive to
price.13. Inelastic - a chg in price has little
impact 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)

28
.
Elastic Demand For Cassette Tapes
TR Test 2.50x100,000250,000 1.50x600,0
00900,000 650,000
D
-1
29
D
TR Test 2 30 bil. 1 20 bil. -10
bil.
-1
25 QD
30
.
Change in Demand curveTIMER
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
31
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
incomedirect. 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-single price D-all prices
QD3
QD2
QD1
32
1. Change in Taste
D2
D1
D3
P
Mini Skirts
Hip Huggers
Bell Bottoms
QD1
Platforms
QD3
QD2
An Increase in Taste shifts the D curve
right 1. The Nehru jacket came went in 6
months. 2. Jordache jean demand created by
TV 3. Leisure suits and bell bottoms.
4. Technological change may cause
consumer taste to changeslide rules.
33
1."Change in Taste"
Direct
If ice cream caused cancer then there would be a
decrease in taste for it resulting in a decrease
in demand.
If ice cream prevented cancer then there would
be an increase in taste for it resulting in
an increase in demand.
D2
D1
OK, this is my last one.
D3
P
QD1
QD3
QD2
34
Advertising Can Shift D also impact QD
D1
D2
45
QD1
QD2
35
Grunge Look in Consumer Taste
Your plumber is coming.
D2
D1
P
36
2. Change in Income
Normal-Direct Inferior-Inverse
Spam
Steak
D2
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
37
2. Change in Income
Normal Good goods whose demand varies
directly with income. Inferior Good goods whose
demand varies inversely with 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
38
3. Change in Market Size Direct
Number of Consumers
D2
D1
P
More demand for both spam and steak.
QD1
QD2
39
3. Market Size (direct) ( of consumers)
Market size 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
40
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
41
4. Consumer Expectations
car
Consumer expectations about future product
price, future availability, future
income. Ex When the Korean War broke out in
the summer of 1950, new car 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.
42
No new cars from 1942-1946
43
No new cars from 1942-1946
1942 Packard
1941 Packard
1947 Packard
44
5. Prices of Related Goods
Substitutes-Direct Complements-Inverse
D1
D2
D1
D
P1
D2
P
P
P2
Complement Inverse
QD1
QD2
Substitute Direct
Chrysler 300s
Toyotas
Gangsta Grills
45

• There are three types of goods.
• Independent goods price change
• of one has no impact on 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
46
Increase in price of one increase in D of
the other
Substitutes - Direct
Demand for Dr Pepper
Price Of 7UP
D2
D1
D
P
P2 P1
QD QD
QD2 QD1
47
Decrease in price of one increase in the D
for the other
Complements - Inverse
P1 P2
QD1 QD2
D2
D1
Car Prices
P
QD QD
Gasoline Demand
Im making more money without dropping my
prices.
No chg in price
They are so cheap that even dogs are buying cars
48
Substitutes Direct Increase in price of one
increase in D of the other
Demand for Microsofts Zune
D2
Price of iPod Video
D1
D
P
P2 P1
QD QD
QD2 QD1
49
Substitutes - Direct
Demand for Turkey
Price Of Chicken
D2
D1
50
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
D1
D
P1
D2
P
P
P2
Complement inverse
QD1 QD2
Substitute Direct
Desktop Computers
Laptops
Monitor
Prices of Related Goods
51
Substitutes - Direct
Price Of Windows Computers
Demand for Apple Computers
D2
D1
52
.
Substitute/Complement Relationships
Substitutes
D1
D
D2
P1
P
Price Decreases
Price Decreases
P2
QD2 QD1
QD1 QD2
DIRECT
Hamburgers
Hot Dogs
Complements
D2
D
D1
Demand Increases
Price Decreases
P1
P
P2
QD1 QD2
QD1 QD2
inverse
Syrup
Pancakes
53

TIMER
P

• Tastes direct
• Incomes
• -Normal direct Inferiorinverse
• Market Size( of consumers) direct
• Expectations of consumers about
• future price-direct future
• income direct and availability inverse
• Related Good Price Changes
• substitutes-direct complements-inverse

Helmets
54
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
incomedirect. 5. Related Good Prices
substitutes-direct complements-inverse
D
D1
D1
D2
D3
P1
D1
D3
D2
P
P
P2
P
Complement inverse
QD1 QD2
Substitute Direct
Chrysler 300s
Gangsta Grills
Toyotas
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-single price D-all prices
QD3
QD2
QD1
55
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 in income inferior good
8. Incr in price of a substitute for
product X 4. Increase in market size of
consumers 9. Decr in price of a complement
of product X
56

• 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
QD3 QD1 QD2
QD1 QD2
Moving along the crab 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

57
Graph The Black Boldfaced Items
/- D/QD
___ ___ 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
expectations about a future price increase
of oranges. ___ ___ 6. Consumers expect the
prices of digital cameras to decrease next 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 Donuts
lowers 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
58
Price Changes for Substitutes
Complements
D
D1
Dr Pepper
Coke
P1 P2
D2
Substitutes - Direct
D
D2
D1
Motorcycles
P1 P2
Helmets
QD1 QD2
Complements - Inverse
59
Change in QD
D
Change in QD Price Change Point to Point Movement
P1 P2
QD1 QD2
D
INVERSE
What is not held constant in these two graphs?
P2 P1
Price
QD2 QD1
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
60
D TIMER QD price change
inverse __1. Which will cause an Increase
in D for MP3 Player phones? a. increase in
income c. 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 income c. decrease in the price
of MP3 Player phones b. increase in income d.
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 projectors c. decrease
in of consumers b. decrease in the price of
projectors d. increase in projector taste
MP3 Player Phone stereo sound,
downloadable sound games and ring tones
A
C
C
A
61
QD D Practice QuizSnickers
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 income d. 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?
62
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 demand says that price 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-the increase 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 demand refers 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 a numerical tabulation
showing QD at each price. The demand
(curve/schedule) is a graphical representation of
the law of demand.
63
NS 11 - 20
11. Elasticity of demandthe 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 test for 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
64
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 complementary product Y.
nails 26. After Brooke Shields15 did her
national TV adsNothing comes between me
and my Calvins, the D curve moved
(right/left).
45
65
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 mans 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 for
margarine will (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
66
The End
Econ, Econ. Let tell you about econ.
67

• 1. Madonna gave a concert at the AAC after
  doubling the ticket
• price and experiencing a change in
  anticipated attendance.
• 2. A decrease in taste causes the demand for
  lobster to shift.
• 3. A 20 increase in the price of Pepsi affect
  the sale of Coke.
• 4. Consumers expect the price of cell phones to
  increase 25 next month.
• 5. The sale of Ford F150s is affected when the
  U.S. begins trading with Cuba.
• 6. New autos decrease in price by 20 the sale
  of gasoline is affected.
• 7. Victorias 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 states
  peaches increases consumer expectations about a
  future price increase of peaches.
• 10. A 15 decrease in the price of motorcycles
  affect the sale of helmets.
• 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
68

• 1. Christina gave a concert at the AAC after
  lowering the ticket
• price and experiencing a change in
  anticipated attendance.
• 2. An increase in taste causes the demand curve
  for lobster to shift.
• 3. The sale of coke is affected by a 20 decrease
  in the price of Pepsi.
• 4. Consumers expect the price of XBOX to decrease
  25 next month.
• 5. The sale of Dr Pepper is 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. Victorias 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
  states oranges and increases consumer
  expectations about a future price increase of
  oranges.
• 10. A 50 increase in the price of bread affect
  the sale of bagels.
• Taste direct
• Income normal-direct inferior-inverse
• Market Size of consumers-direct
• Expectations price-direct income-direct
  availability-inverse
• Related Good Price Changessubs-direct
  complements-inverse

1.QD 2.D 3. -D 4.-D 5.
-D 6.D 7.QD 8.QD 9.D 10.D
69

• Review of Demand

70
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
Marginal Utility - because buyers of
successive units receive less marginal utility,
they will buy more only when the price is
lowered.
Iphone 8 GB
399.00
Change in QD 1. Price change 2. Movement
up/down the demand curve 3. Point to point
along the curve
Price
QD
250.00
Inverse relationship
QD2
QD1
D refers to the whole curve. all
prices QD refers to a point on the
curve based on a particular price.
71
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
incomedirect. 5. Related Good Prices
substitutes-direct complements-inverse
D
D1
D1
D2
D3
P1
D1
D3
D2
P
P
P2
P
Complement inverse
QD1 QD2
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
72
1."Change in Taste"
Direct
An increase in taste for DVDs results in
an increase in demand.
A decrease in taste for videos results in
a decrease in demand.
D2
D1
D3
P
QD1
QD3
QD2
73
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
74
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
75
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
76
4. Expectations of consumers
about future income
Lets say that we are coming out of recession
consumers feel secure about their jobs.
Positive future income
D2
D1
P
QD1
QD2
77
4. Expectations of consumers
about future income
Lets say that we are going into a recession and
consumers dont feel secure about their jobs.
Negative future income
D1
D2
P
QD2
QD1
78
5. Prices of Related Goods
Substitutes-Direct Complements-Inverse
D1
D2
D1
D
P1
D2
P
P
P2
QD2
Complement Inverse
QD1
Substitute Direct
Cereal
Pop Tarts
Milk
79
Price Changes for Substitutes
Complements
D
D1
Dr Pepper
Coke
P1 P2
D2
Substitutes - Direct
D
D2
D1
Motorcycles
P1 P2
Helmets
QD1 QD2
Complements - Inverse
80
Change in QD
D
Change in QD Price Change Point to Point Movement
P1 P2
QD1 QD2
D
INVERSE
What is not held constant in these two graphs?
P2 P1
Price
QD2 QD1
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
81
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 income c. increase
in the price of iPod nanos b. decrease in
income d. decrease in the price of iPod
nanos ___2. Which of the following will cause an
Decrease in QD for iPod nanos? a. decrease
in income c. decrease in the price of iPod nanos
b. increase in income d. 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 HDTVs c. decrease in
of consumers b. decrease in the price of
HDTVs d. increase in HDTV taste ___4. Which of
the following will cause a Increase in QD for
HDTVs? a. increase in the price of HDTVs c.
decrease in of consumers b. decrease in the
price of HDTVs d. increase in IPOD taste
B
D
D
B
82
QD D Practice 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 income d. 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
Reeses would cause a(n) (increase/decrease)
in (QD/D) for KitKats?
83
.
Elastic/Inelastic Demand
Go over Total Receipts Test For Elastic
Inelastic
84
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