Standard SSEMI3a. Identify and illustrate on a graph factors that cause changes in market demand.

Demand Curve Price Quantity Demanded

Change in Quantity Demanded A movement ALONG THE DEMAND CURVE that shows the change in quantity in response to a change in price. $100 $50 20 70 100 units

Change in Demand When there is a CHANGE in DEMAND: People are now willing to buy different amounts of the product at the same prices. There are 6 factors that cause a change in demand:

Determinants of Demand Just remember: N I C E S T

N*I*C*E*S*T Number of Consumers The demand curve will shift as the number of consumers change. Ex: With the U.S. population aging, demand for different products will increase

N*I*C*E*S*T Changes in the amount if Income a person makes can cause a change in demand. As income increases, demand increases As income decreases, demand decreases

N*I*C*E*S*T Complements Goods that are related and tend to be consumed or used together The use of one increases the use of the other Peanut butter and Jelly Chips and dip

N*I*C*E*S*T Changes in Expectations What people believe about the future Ex: If people believe that their job or their lifestyle will experience significant change in the near future, consumer spending will likely decrease.

N*I*C*E*S*T Substitutes A product can be used in place of another product. Consumers will substitute a less expensive product if price of their chosen product increases. You can use Splenda or Equal for Sugar

N*I*C*E*S*T Consumer Taste Consumers do not always want the same things over time. Beenie Babies, Silly bands, flip phones iPhones, Androids

Marginal Utility Marginal Extra The extra usefulness or satisfaction a person gets from acquiring or using one more unit of product Diminishing Marginal utility: states the extra satisfaction we get from using additional quantities of the product begins to diminish Marginal Extra

Vocabulary: Market Clearing Price: the price at which the amount supplied is equal to the amount demanded Equilibrium Price: the price at which the amount of goods producers supply meets the amount of goods that consumers demand Equilibrium Quantity: quantity supplied and quantity demanded at the equilibrium price

Surplus: situation in which quantity supplied is greater than quantity demanded Shortage: a situation in which quantity demanded is greater than quantity supplied