1. Consumer Income Consumer Income – The amount of money a consumer has can affect their willingness to purchase certain items. Examples: Normal good – Express For Men (Name Brand) Inferior good – Wal-Mart Brand (Generic Brand)   

Normal Good Inferior Good

Consumer Income P D D1 QD P D1 D QD

Consumer Income P D1 D QD P D1 D QD

2. Price of Related Goods Price of related goods – demand for goods can be affected by the price for related goods Examples: Complements - Iphone and Case Substitutes - Gatorade and Powerade   

Complementary Products QD P D D1 QD

Substitute Products P D QD P D QD

SHIFTS in the Demand Curve Price of Related Goods SUBSTITUTES $1.25 D D 2 25 10 Less coffee is demanded at $1.25

SHIFTS in the Demand Curve Price of Related Goods SUBSTITUTES $1.25 D 2 D 25 40 More coffee is demanded at $1.25

SHIFTS in the Demand Curve Price of Related Goods COMPLIMENTS $1.25 D 2 D What if the price of donuts went down? 25 40 More coffee is demanded at $1.25

SHIFTS in the Demand Curve Price of Related Goods COMPLIMENTS $1.25 D D 2 What if the price of donuts went up? 25 10 Less coffee is demanded at $1.25

3. Consumer Tastes Consumer Tastes and Advertising – changes in popularity changes the “dollar vote” of the consumer Examples: Popularity decreases - 80’s band Poison Popularity increases - Drake   

Consumer Tastes P D1 D QD P D D1 QD

SHIFTS in the Demand Curve Change in Preferences $1.25 D 2 D What if you began to enjoy coffee more than before? 25 40 More coffee is demanded at $1.25

SHIFTS in the Demand Curve Change in Preferences $1.25 D D 2 What if you started to get sick of drinking coffee? 25 10 Less coffee is demanded at $1.25

4. Consumer Expectations Consumer Expectations – the way people anticipate changes in products, technology or the economy Example: Iphone 5 to the Iphone 10 Changes in body styles of cars   

Consumer Expectations D1 D QD P D D1 QD

SHIFTS in the Demand Curve Expectations $1.25 D What if you knew there was going to be a sale on coffee next week? D 2 25 10 Less coffee is demanded at $1.25

SHIFTS in the Demand Curve Expectations LAST DAY $1.25 D 2 What if you knew that a sale on coffee were ending tonight? D 25 40 More coffee is demanded at $1.25

5. Number of Buyers (Population) Population – an increase/decrease in the number of consumers Increase in population - Georgia Florida weekend, Super Bowl, Olympics Decrease in population - Detroit, loss of 1 million people  

Number of Buyers (Population) D D1 QD P D D1 QD

The Determinants of Demand Consumer Income Tastes Expectations Price of Related Goods Population

Difference Between Movement (Change in Quantity Demanded) and a Shift (Change in Demand) QD (Movement) - A change in the amount a consumer will purchase as a result of a change in price Ceteris paribus – all other things constant, all things remaining the same Reflected as movement along the curve D (Shift) – A change in the amount a person will buy as a result of an outside factor (change in ceteris paribus - popularity of product, consumer income, etc.), not having to do with price Reflected as a shift P P a a $100 $100 b D b D $10 $10 10 100 QD 10 100 QD

Analysis of the Beef Market Headline Demand Shift? (Y/N) Does the curve shift Left/Right? Or did it cause movement along the curve? Increase/Decrease in Demand, or Change in Quantity Demanded? New Curve (A or C), or N/A. Determinant(s) of Demand (Income, Population, Price of Related Product, Expectations, Tastes) or Not Applicable. 1. Millions of Immigrants Swell U.S. Population Yes Right Increase C Population 2. The Price of a lb. of Beef Doubles No Movement QD N/A N/A (price) 3. Consumer Income for U.S. consumers falls for 3rd straight month Left Decrease A Income 4. Surgeon General Warns That Eating Beef is Hazardous to Your Health Tastes/Expectations

Yes Right Increase C Expectations Left Decrease A No Movement QD N/A Headline Demand Shift? (Y/N) Does the curve shift Left/Right? Or did it cause movement along the curve? Increase/Decrease in Demand, or Change in Quantity Demanded? New Curve (A or C), or N/A. Determinant(s) of Demand (Income, Population, Price of Related Product, Expectations, Tastes) or Not Applicable. 5. Price of Beef to Rise Next Month Yes Right Increase C Expectations 6. Price of Beef to Fall Left Decrease A 7. The Price of lb. of Beef falls by 50% No Movement QD N/A N/A (price) 8. Free Buns With Every lb. of Beef at Local Publix Related goods

Flow Chart – Determinants of Demand What Causes a Shift? Consumer Income Consumer Expectations Population Consumer Tastes and Advertising Price of Related Goods Example of Increase Demand An individual gets a an increase in income. Increase in demand for name brand products; decrease for generic. Example of Increase Demand If an individual expects price of the bike to rise in the future, their demand will increase today. Example of Increase Demand Return of soldiers from WW2 led to a baby boom, which increased demand for baby products. Example of Increase Demand Bell-bottomed jeans were at one time very popular. Example of Increase Demand Snowboards will experience an increase in demand if the price of skis goes up, making the two goods substitutes. Example of Decrease Demand An individual’s Example of Decrease Demand If an individual expects the price of the bike to go down in the future then their demand will decrease today. Example of Decrease Demand If a population decreases, then their will be a decrease in demand for housing, automobiles, food, etc. Example of Decrease Demand Any product that goes out of style can be affected by consumer tastes and a decrease in demand. Example of Decrease Demand Ski boots are considered complements for skis. If Ski boots are too expensive, demand for skis will decrease. income goes down. Decrease in demand for name brand products; increase in demand for generic.

Review with Colander QUIZ

Analyzing Demand Headlines (pkt) Changes in Demand (pkt)