Supply and Demand in Action The Motion of a “Free Market”

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Presentation transcript:

Supply and Demand in Action The Motion of a “Free Market”

Demand is Dynamic (it changes) There are 2 types of Demand Changes: 1) Change in QUANTITY Demanded AND 2) Change in Demand

Change in Quantity Demanded ONLY price changes => Qty Demanded Changes D1D1 Only Price Changes Movement along an existing Demand Curve

Change in Demand A Change in Demand leads to a SHIFT in Demand Curve (new demand curve) A shift occurs whenever a Determinant of Demand changes

Determinants of Demand (TIPSE) Tastes Incomes Population Substitutes & Complements Expectations

Change in Demand D1D1 D2D2 Change in (TIPSE) ? INCOME RISES