Factors Which Change Demand

Change in Demand Change in Demand: When people are wiling to buy different amounts of the product at the same prices The demand line shifts to the right (increase) or left (decrease)

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Factors That Change Demand Consumer Income –Increase in income = higher demand (shift to the right) –Decrease in income = lower demand (shift to the left) Example: recession Number of Consumers –More consumers = higher demand –Fewer consumers = lower demand Baby boomers & hearing aides

Factors That Change Demand Consumer Tastes –More people like it = increase in demand –Less people like it = decrease in demand Bell bottom jeans in the 70’s and 80’s Expectations –If prices of a good are expected to go up in the future, demand will go up in the present –If prices of a good are expected to go down in the future, demand will go down in the present Oil & hurricanes

Factors That Change Demand Substitutes –Goods that can replace other goods Ex. Pepsi v. Kroger brand soda –Increase in the price of a substitute = increase in the demand for other goods –Decrease in the price of a substitute = decrease in the demand for other goods Complements –Goods that go along with other goods –Increase in the price of complements = decrease in demand for other goods –Decrease in the price of complements= increase in demand for other goods Ex. Hot dogs and hot dog buns

Important Differences… Change in quantity demanded Affected ONLY by price changes for the good/service being discussed –The line does not move; the point on the line does Change in demand Affected by many factors –The demand line moves (shifts)

Practice Changes in consumer tastes –A new “baggy jeans” fad has begun to spread throughout the country. What will happen to the demand for baggy jeans? Substitutes –Pizza Hut has just dropped the price for their pizzas. What will happen to demand for Papa John’s? Complements –The cost for a song on iTunes has just been raised to $5.00/song. What will happen to the demand for MP3 players?