Ch. 4.2 Notes: Factors Affecting Demand. I. 2 Graphs explaining why we buy more….. A. Change in Quantity Demand = price down we buy more 1. Why? a. Income.

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Ch. 4.2 Notes: Factors Affecting Demand

I. 2 Graphs explaining why we buy more….. A. Change in Quantity Demand = price down we buy more 1. Why? a. Income Effect = it’s cheaper and you can afford it now

b. Substitution Effect = as price goes down, people will buy that product over other products $4.99 $2.99 X

B. Change in Demand = price same but we buy more 1. Why? a. consumer tastes changes = advertising b. Our income goes up…… i. Normal Goods = Income up,buy more ii. Inferior Goods = Income down, buy more

c. prices of other products change …… i. Substitutes = items that replace each other * Ex. Ex. If the price of boxers increase, what happens to the demand of briefs?

ii. Complements = items that are used together Ex. If the price of golf clubs increase to $500 each, what happens to the demand of golf balls?

d. Change in expectations = when we foresee something in the future and we buy more now * Ex. Sales of Guns Soar in U.S. as Nation Weighs Tougher Limits

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