Shifts in Demand. Price ($) Quantity D D Increase in DemandDecrease in Demand D1 An increase in demand will cause the demand curve to shift to the RIGHT.

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Presentation transcript:

Shifts in Demand

Price ($) Quantity D D Increase in DemandDecrease in Demand D1 An increase in demand will cause the demand curve to shift to the RIGHT An decrease in demand will cause the demand curve to shift to the LEFT

There are 4 things that will SHIFT the demand curve

1. A change in tastes and Preferences This may be influenced by advertising, values, the weather, the season or fashion.

Tastes and Preferences Isobel has seen her best friend playing a nintendo dsi and is now desperate to buy one. Draw a graph illustrating the effect on Isobels demand for Nintendo dsi’s. Neema has recently read that fish oil is supposed to improve memory and brain development. Draw a graph illustrating the effect on Neema’s demand for Salmon. Cameron recently became sick after eating too many Easter eggs and now he cannot stand the taste of chocolate. Draw a graph illustrating the effect on Cameron’s demand for chocolate Joel has seen the latest skateboard advertised while he has been watching his favourite TV show. He thinks they look fantastic. Draw a graph illustrating the effect on Joel’s demand for skateboards

Workbooks page 34-7

2. Income Income = The funds received by a person or household. E.g. Salary, wages, benefit, inheritance If a persons income increases they are able to buy more of a good or service at the same price because they can afford to We all pay tax on our income, this is called PAYE (Pay as you earn) Disposable income = Income after paying tax If the tax we pay decreases then our disposable income increases and our demand will also increase. The opposite will also occur if tax rates increase.

Workbooks page 39-42

Income and types of goods We can classify goods as being either, Luxuries, Necessities or Inferior goods.

NORMAL GOODS Are products that we demand more of when our income rises. Most products have this “normal” relationship.

INFERIOR GOODS Are products which we buy less of as our income rises. As our income increases we switch our spending towards higher quality products.

Luxury Goods More expensive higher quality versions of goods E.g overseas travel or expensive cars. Luxuries are goods that usually take up a great proportion of income

Increase in Income Price ($) Quantity Luxury GoodsInferior Goods D1 D D As income increases, consumers switch consumption from inferior goods to more luxury type goods

Workbooks page 39-42

3. SUBSTITUTES Substitutes are products that we can use instead of each other. If the price of one rises, the quantity demanded falls causing an increase in demand for the other.

SUBSTITUTES P P Q Q d BUTTERMARGARINE d’ d Price of butter falls. Quantity demand for butter increases. Demand for margarine falls

4. COMPLEMENTS Complements are products that we usually use together.If the price of one rises, quantity demanded falls causing a decrease in the demand for the other.

COMPLEMENTS CARS PETROL PP Q Q d d d” Price of cars falls. Quantity demanded for cars increases. Demand for petrol increases.

Workbooks page

Quantity Demand or Demand