Demand Basics “We Wants What We Wants”. D D Demand will increase (new Demand curve; will shift right)

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Presentation transcript:

Demand Basics “We Wants What We Wants”

D

D

Demand will increase (new Demand curve; will shift right)

Demand will decrease (new Demand curve; will shift left)

As something becomes MORE popular, Demand for that good will INCREASE (shift to the right) As something becomes LESS popular, Demand for that good will DECREASE (shift to the left) As income INCREASES, Demand for all normal goods will INCREASE (shift to the right) As income DECREASES, Demand for all normal goods will DECREASE (shift to the left) As income INCREASES, Demand for all inferior goods will DECREASE (shift to the left) As income DECREASES, Demand for all inferior goods will INCREASE(shift to the right)

As the price of a good INCREASES, the Demand for its complement will DECREASE (shift to the left) As the price of a good DECREASES, the Demand for its complement will INCREASE (shift to the right) Goods that go together (e.g., peanut butter & jelly) Goods that can replace each other (e.g., Coke & Pepsi) As the price of a good INCREASES, the Demand for its substitute will INCREASE (shift to the right) As the price of a good DECREASES, the Demand for its substitute will DECREASE (shift to the left)

Do we expect that the price of a good will change significantly in the future? If the price of a good is expected to INCREASE, the Demand for that good in the short term will INCREASE (shift to the right) If the price of a good is expected to DECREASE, the Demand for that good in the short term will DECREASE (shift to the left) If we add consumers to the economy (through birth or immigration) the Demand for all goods will INCREASE (shift to the right) If we lose consumers in an economy (through death or emigration) the Demand for all goods will DECREASE (shift to the left)

You may eat 2 slices of pizza and be satisfied. But suppose the price was lowered to $1. If you buy an additional slice, this represents Diminishing Marginal Utility

Marginal Utility