What factors affect demand? Action buttons allow easy access to commonly used slides from any point in presentation.

Number of Buyers Price Prices of other goods Determinants of Demand Income Quality Expectations about future Supply? Tastes

Determinants of Demand Price Prices of other goods Expectations about future Quality Income Tastes Number of Buyers Supply?

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Using Action Settings Any object can be used to link to another page in the PowerPoint presentation or an external web page. Assign “Action Settings” in Slide Show menu.

Using Action Settings By assigning an actions to objects in a presentation, a PowerPoint presentation is transformed from a Slide Show into an interaction web page. Any object can be used to link to another page in the PowerPoint presentation or an external web page. Assign “Action Settings” in Slide Show menu.

Using Action Settings By assigning an actions to objects in a presentation, a PowerPoint presentation is transformed from a Slide Show into an interactive web page. Any object can be used to link to another page in the PowerPoint presentation or an external web page. Assign “Action Settings” in Slide Show menu.

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Price Price is the most important determinant of demand. A “demand curve” plots combinations of prices and quantity demanded. A shift in price causes a shift along the demand curve

Price (continued) A change in price causes a shift along the demand curve. A shift along the demand curve is referred to as a “shift in the quantity demanded.” A shift in any other variable except price causes a shift in the entire demand curve. A shift in the entire demand curve is referred to as a “shift in demand.”

Income Changes in income can increase or decrease demand. A good whose demand decreases with an increase in income is called an “inferior good.” A good whose demand increases with an increase in income is called a “normal good.”

Examples of changes in income An increase in income will reduce the demand for ramen noodles or generic products. An increase in income will increase the demand for cars or clothing. An increase in income will significantly increase the demand for air travel or jewelry.

Prices of other goods Changes in the prices of other goods can increase or decrease demand. A good that causes an increase in the demand for another good when its price increases is called a “substitute good.” A good that causes a decrease in the demand for another good when its price increases is called a “complementary good.”

Examples of changes in other prices An increase in the price of peanut butter will reduce the demand for jelly. Peanut butter and jelly are complements. An increase in the price of Pepsi will increase the demand for Coke. Pepsi and Coke are substitutes.

Number of buyers An increase in the number of potential buyers will increase the demand for the good. For example, the demand for land increases as the population increases. Similarly baseball tickets are generally more expensive in larger cities.

Future Prices An increase in the expected future price of a good increases current demand. A decrease in the expected future price of a good decreases current demand. For example, when a good is temporarily put on sale, people stock up on the good.

Tastes Demand curves can shift due to changes in tastes over time. For example, demand for cereal may be high in the morning but low at night. Similarly, demand for Saturday Night Fever CDs may be high in the 1970s but low in the 2000s.

Quality Demand curves can shift due to changes quality. At a given price, demand for Giordano’s pizza is higher than the demand for Papa John’s. Similarly, CDs cost more than cassettes because the music is of higher quality.

Supply? Demand curves do not shift due to changes supply. Shifts in supply change the equilibrium price causing a shift along the demand curve. Shifts in supply cause a change in the quantity demand not a shift in the demand curve.

Graph of a supply shift An decrease in supply shifts the supply curve to the left. Equilibrium price increases. Quantity demanded decreases.

Increase in demand An increase in demand shifts the demand curve to the right. Equilibrium price increases. Quantity demanded increases.

Decrease in demand A decrease in demand shifts the demand curve to the left. Equilibrium price falls. Quantity demanded falls.