What is Market Research? s/consumersurveys/home# s/consumersurveys/home#

A neutral source on information A neutral source on information Allows for change in the economy Allows for change in the economy It allows freedom of choice It allows freedom of choice What is the role of PRICE in the economy?

DEMAND

Demand  Demand is the desire to have some good or service and the ability to pay for it.  The law of demand states that when the PRICE of a good or service GOES DOWN, consumers buy MORE, meaning demand increases.  If price goes UP, demand should DECREASE. The Big Bang Theory 5x05 - The Sword - YouTube

Demand Curve Pt. Price of DVDs Quantity Demanded A$300 B$251 C$202 D$153 E$104 F$55 0 Quantity Price A B C D E F

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Demand Changes  Change in quantity demanded is a change in PRICE or QUANTIY. This will cause you to move along the curve, up/down. We call these “MOVERS”

Quantity Price A B C D E F Change in Quantity Demand

Demand Changes  Change in demand meanwhile is a change in the AMOUNT YOU BUY. This means the curve will shift to the left or to the right. We call these “SHIFTERS”

Quantity Price A B C D E F Change in Demand B C D E F A

 There are six factors that influence Demand.

Substitutes  Substitutes are goods/services that can be used in place of another good or service.  If the price of a substitute changes, people may be more/less inclined to get the original item.  Example  Pepsi or Coca Cola

Substitute’s price goes up Substitute’s price goes down

Complements  Complements are goods that are used together, so that a rise in demand in one good will increase the demand for the other good.  Example: hammer & nails

Complement’s price goes up Complement’s price goes down

Income  People’s ability to buy certain goods is affected by their income.  If their income changes, then their ability to buy certain goods will change.

Recession hits: Lower Incomes Economic Growth: Higher Incomes

Consumer Tastes  People’s tastes are constantly changing!  Advertising influences people’s tastes.

Terms  Normal Goods – goods consumers demand more of when their income rises.  Inferior Goods – goods that consumers demand more of when their income falls.

Recession hits: Generic brand goods Economic Growth: Generic brand goods

Consumer Expectations  If you expect a good to go on sale next month, you will WAIT to buy that product  Examples  Cars  Gas  Tickle-Me-Elmo

Consumers expect price to rise Consumers expect price to fall

Market Size  The size of the market is based on the number of consumers.  If people leave a region, the market size will decrease meaning the curve will shift to the left and vice versa.  Example  People leaving Buffalo has caused a smaller market size.  More people moving to Florida and Texas has created larger market sizes in these states.

Bigger PopulationSmaller Population

Elasticity of Demand  Elasticity of demand is how responsive consumers are to price changes.  Elastic demand – quantity demanded will change greatly as price changes.

Elastic Demand 0 Quantity Price A B C D E F When demand is elastic, prices will not change much, but quantity demanded will change.

Elasticity of Demand  Inelastic demand – quantity demanded will change little as price changes.

Inelastic Demand 0 Quantity Price A B C D E F When demand is in elastic, prices will change a lot, but quantity demanded will not change much.

Factors that Determine Elasticity Are there good substitutes? Yes = elasticNo = inelastic What proportion of income does it use? Large = elasticSmall = inelastic Is it a necessity or a luxury? Is it a necessity or a luxury? Luxury = elasticNecessity = inelastic