Supply & Demand #2: Factors Affecting Demand. Journal List some ideas, situations and/or examples that you think may affect demand. –Copy question AND.

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Supply & Demand #2: Factors Affecting Demand

Journal List some ideas, situations and/or examples that you think may affect demand. –Copy question AND answer –Example: High prices; low prices

Demand #2 Objectives 1.To explain what causes a change in quantity demanded. 2.To list and describe the factors that could cause a change in demand.

Demand The,, and to buy a product Quantity demanded: amount demanded

Demand Curve & Schedule PRICE QUANTITY DEMANDED $300 $250 $201 $153 $105 $58

Demand Curve in Action PRICEQUANTITY DEMANDED $300 $250 $201 $153 $105 $58

Law of Demand Quantity demanded varies inversely (opposite) w/ price: –Price goes up, demand goes –Price goes down, demand goes

The Income Effect –The change in quantity demanded because of a change in price that changes consumers’ real income. When consumers become “richer” because they have extra money due to a drop in price of a product/products

The Substitution Effect –The change in quantity demanded because of the change in the relative price of the product. Price can cause consumers to substitute on product with another similar, cheaper item. BUTTER CONCERT DAIRY MILK BEEF

Change in Demand Change in demand –When consumers are willing to buy different amounts of the product at same prices THE ENTIRE DEMAND CURVE SHIFTS To the RIGHT to show an INCREASE in demand To the LEFT to show a DECREASE in demand **Draw a demand curve. Then draw a change in demand.

Causes – Change in Demand INCOME TASTES PRICE OF RELATED GOODS EXPECTATIONS NUMBER OF CONSUMERS

Price of Related Goods A.Substitutes: Price of product increases, demand of substitute increases Price of product decreases, demand of substitute decreases Price of El Pollo Loco doubles! Will demand for Subway increase or decrease?

Complements: products that you buy together EX: milk & cookies –Airplane tickets & hotels Price of product increases, demand for complement decreases Price of product decreases, demand for substitute increases –If there’s a huge salsa sale, what will happen to the demand for chips?

COMPLEMENTS COMPUTERS HOT DOGS GOLF CLUBS

Change in Expectations The way people think about the future –Future new technology that may make you buy less/more of a product today. –Weather service forecasts a bad year for crops

Number of Consumers An increase (or decrease) in the number of consumers can cause the market demand curve to shift.

Essential Questions 1.Describe the difference between a change in quantity demanded and a change in demand. 2.Explain how a change in price affects the demand for a product’s substitute.