Mr. Schoonover 9/29/2009

 What does the demand curve tell us?  What causes demand to change along the demand curve?  What about other factors? What if pizza is proven to make someone live longer? What if Lil Wayne endorses a new brand of Sun Glasses? What if the new iPhone is more prone to viruses?

 A change in price causes a change in Quantity Demanded. This is shown as movement along the line.  A change in a factor other then price causes a change in demand. This causes the entire curve to SHIFT! This means that consumers demand more at EVERY price

Price Quantity $1 $2 $5 $4 $3

Price Quantity $1 $2 $5 $4 $3

 Five things that Cause the Curve to Shift Income – The more money you earn, the more you will spend and vice versa.  Inferior Goods – Things you buy less of when you have more money – TP, Off Brand things, used Cars EXAMPLE: You get a pay raise. In turn you increase the amount of steak you purchase.

 Consumer Expectations – If you expect the price of something to rise, demand rises. If you expect it to drop your demand drops.  EXAMPLE: Golf rates rise in the Summer, so in the spring your demand rises. Prices drop in the Fall so in the summer your demand lowers.

 Population – A rise in population will increase the demand for goods.  EXAMPLE: When the baby boomer generation got to college, the demand for dorm rooms did what?

 Image and Advertising – current trends and more advertising causes the curve to shift.  Example: Low-carb diets become very popular, what will happen to the demand for bagels?  An increase in advertising by Macintosh (those hilarious commercials) causes the demand for Mac’s to increase.

 Prices of related goods – The demand for one good can be affected by a change in demand for another good.  Compliments – Two goods that are used together. If the price of Blue Ray Discs drops, the demand for Blue Ray Players increases.  Substitutes – goods that are used in place of each other  A rise in cost of Xbox 360 may cause more people to purchase a Nintendo Wii.