Determinants of Demand S&D #7 Determinants of Demand Why might demand go up or down even if the price of the product remains the same? Imagine that the Subway across the street sells 40 $5 foot longs on an average day. Why might quantity demanded go up to 60 even if the price stays at $5?

Graphing Demand Price Quantity Demanded $3 60 $5 40 $7 20

With 2 dashed lines, draw the following on the same graph! Price Quantity Demanded $3 80 $5 60 $7 40 Price Quantity Demanded $3 50 $5 30 $7 10

Determinants of Demand: factors (other than price) that affect demand Consumer Income: Normal goods: real income increase, demand of these increases TVs, steaks, cell phones Inferior goods: real income decreases, demand of these increases Laundry mat, used products, bologna

2. Price of Related Goods Substitutes: Price of sub increases, demand of original increases Price of sub decreases, demand of original decreases Price of El Pollo Loco doubles! Will demand for Subway increase or decrease?

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

3. Types of consumers Increase in elderly – demand for “elderly” products will increase Ex: Increase in teenagers – demand for “teen” products will increase Right now, which group is larger? Who should you make products for?

4. Consumer Expectations How do most ppl feel about the economy right now? If consumers expect econ to be bad – demand decreases If consumers expect econ to improve – demand increases

5. Consumer preferences The last answer! How ppl feel about the product – is it “cool”?