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 Occasionally something happens to change people’s willingness and ability to buy.  These changes are usually of two types: quantity demanded  a change in the quantity demanded demand  a change in demand

quantity demanded  The change in quantity demanded shows a change in the amount of the product purchased when there is a change in price.

Remember quantity demanded Remember : Change in quantity demanded is a result of the change of a price.

But wait, does demand only change when the price changes???

change in demand A change in demand is when people buy different amounts of the product even though the price stays the same. Why does this happen?

To say it differently: A change in demand occurs when there is no change in price.

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 Demand What if cereal makes you smarter?

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $51030 $42040 $33050 $25070 $ Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $51030 $42040 $33050 $25070 $ Demand D1D1 Increase in Demand Prices didn’t change but people want MORE cereal

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 What if cereal causes baldness? Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $5100 $4205 $33020 $25030 $ Demand

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $5100 $4205 $33020 $25030 $ DemandD2D2 Decrease in Demand Prices didn’t change but people want LESS cereal

Q o $ Price of Cereal Quantity of Cereal Demand Schedule Price Quantity Demanded $510 $420 $330 $250 $180 What if the price of MILK goes up? Demand

5 Shifters (Determinates) of Demand: 1.Tastes and Preferences 2.Number of Consumers 3.Price of Related Goods Substitutes Complements 4.Income 5.Future Expectations 6.Seasons Changes in PRICE don’t shift the curve. It only causes movement along the curve. 20

2. Complements are two goods that are bought and used together.  If the price of one increase, the demand for the other will fall. (or vice versa)  Ex: If price of skis falls, demand for ski boots will Substitutes are goods used in place of one another.  If the price of one increases, the demand for the other will increase (or vice versa)  Ex: If price of Pepsi falls, demand for coke will… The demand curve for one good can be affected by a change in the price of ANOTHER related good. 21

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2. Inferior Goods  As income increases, demand falls  As income falls, demand increases  Ex: Top Ramen, used cars, used clothes, 1. Normal Goods  As income increases, demand increases  As income falls, demand falls  Ex: Luxury cars, Sea Food, jewelry, homes The incomes of consumer change the demand, but how depends on the type of good. 30

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VERY IMPORTANT COW! 32

1. What are the two key aspects of the definition of demand? 2. What is the Law of Demand? 3. Give an example of the law of diminishing marginal utility 4. Explain how the law of diminishing marginal utility causes the law of demand 5. What are the six shifters of demand? Give an example of each. 6. How do you determine the MARKET demand for a particular good? 7. Name 10 superheroes 33

VERY IMPORTANT COW! 34

P Q Cereal o $3 $2 D1D1 Price of Cereal Quantity of Cereal AC B There are two ways to increase quantity from 10 to 20 D2D2 1.A to B is a change in quantity demand (due to a change in price) 2.A to C is a change in demand (shift in the curve)

First, identify the determinant (shifter) then decide if demand will increase or decrease 36 Shifter Increase or Decrease Left or Right

Hamburgers (a normal good) 1. Population boom 2. Incomes fall due to recession 3. Price for Carne Asada burritos falls to $1 4. Price increases to $5 for hamburgers 5. New health craze- “No ground beef” 6. Hamburger restaurants announce that they will significantly increase prices NEXT month 7. Government heavily taxes fries and causes their prices to quadruple. 8. Restaurants lower price of burgers to $.50 First identify the determinant (Shifter). Then decide if demand will increase or decrease 37