Get handout from the table & complete as quickly & quietly as

possible.

• Get your notebooks out.• Have pen/pencil ready!

Change in Demand

The only change we have discussed . . .

• Until this point has been a change in price.• Change in price causes a change in ________.• Though price stays the same, there are things

that can cause a change in the Quantity Demanded.

• When price stays the same and the quantity demanded changes due to other factors, economists say that we have a change in demand.

How is change in demand graphed?

Quantity Demanded

$10

$5

100 200 300

Price

$20

D

When price stays the same and something else happens, the amount demanded may increase. An increase in demand would be graphed like this . . .

400

D1

Previously at $20, none of the items were demanded. Now due to something other than a change in price, 200 of these items are demanded at the same price of $20. Previously at $10, 100 were demanded; now 300 are demanded at the same price of $10; etc. Note: Price stayed the same.

This is referred to as a shift in demand or an increase in demand and is labeled D1.

Determinants of Demand

• There are 6 things that can cause a change (or shift) in demand when price stays the same:– Change in Consumers’ Income– Change in number of Consumers– Change in price of a substitute good.– Change in consumers’ expectations.– Change in price of a complementary good.– Change in consumers’ tastes & preferences.

• INSECT

What can cause an increase in Demand?

• Increase in consumers’ incomes.

• Increase in number of consumers.

• Increase in price of a substitute good.

• Change in consumers’ expectations.

• Decrease in price of a complementary good.

• Change in consumers’ tastes & preferences.

What can cause an increase in Demand?

• Increase in consumers’ incomes.

• Increase in number of consumers.

• Increase in price of a substitute good.

• Change in consumers’ expectations.

• Decrease in price of a complementary good.

• Change in consumers’ tastes & preferences.

Give me scenarios, Ms. Squires!• Pres. Obama has

announced that he is cutting income tax withholdings from paychecks for all United States citizens by 50% beginning with the next pay period!

• Consumers feel richer and demand more of items at the same prices simply because they have more money due to the tax cut.

Increase in Income

Give me scenarios, Ms. Squires!• Millions of people

immigrate to the United States from China!

• The amount demanded at the same prices increases simply because there are so many more people living in the United States. An increase in demand (shift to the right) occurs.

Increase No. of Consumers

Give me scenarios, Ms. Squires!• Millions of people

immigrate to the United States from China!

• The amount demanded at the same prices increases simply because there are so many more people living in the United States. An increase in demand (shift to the right) occurs.

Increase No. of Consumers

Give me scenarios, Ms. Squires!• Substitute good is one that

can be used in place of another good. Examples: Butter/Margarine; Tide laundry determine/Sun laundry detergent. Polo jeans/Faded Glory jeans.

• The price for Faded Glory jeans increases. Demand for Polo jeans increases though the price stayed the same. The price of the substitute good changed! An increase in demand (shift to the right) occurs.

Change in Price of a Substitute Good

Increase in Price of Substitute GoodDemand Curve for Faded Glory Jeans

Demand Curve for Polo Jeans

Price of Faded Glory jeans increased from $5 to $20 per pair.

The price for polo jeans did not change – it remained the same. Due to change in price of substitute (Faded Glory), people are demanding more at same prices.

Change in Consumer Expectations• Newspaper headline:

“Price of beef expected to double in November!” It is now October.

• The amount demanded at the same prices increases simply because people expect the price to go up in Nov. It is now Oct. They will freeze beef! An increase in demand (shift to the right) occurs.

Demand for Beef in October

What’s a complementary Good

• A good that one usually buys when another item is bought. Examples:– Peanut butter & jelly– Hamburger meat & hamburger buns– DVD players & DVDs– Computers & computer software

Decrease in Price of a Complementary Good

Demand Curve for DVD Players Demand Curve for DVDs.

Price of DVD players decreased from $20 to $5.

The price for DVDs did not change – it remained the same. Due to change in price of a complementary (DVD players), people are demanding more DVDs at same prices.

Change in Consumers Tastes & Preferences

• All teen fashion magazines show models wearing bell bottom jeans.

• Price of bell bottom jeans did not change! The amount demanded at the same prices increases simply because teenagers now like and feel they must have bell bottom jeans. An increase in demand (shift to the right) occurs.

Bell Bottom Jeans

If the price for an item increases, demand for its substitutes

1 2 3 4

68%

5%5%

23%

1. Increases.2. Decreases3. There is no way to

tell4. Is unaffected.

When the income in houses increases, what is the most likely result?

1 2 3 4

61%

33%

6%0%

1. The demand curve shifts to the right.

2. The demand curve shifts to the left.

3. There is no change in the demand curve.

4. Movement occurs along the demand curve.