1. Drill #
1. What is demand?
2. What two effects cause the law of demand?
3. What is a demand curve?

2. Shifts in the Demand Curve

3. Ceteris Paribus Ceteris paribus means all other things being equal
When looking at a demand curve you can only isolate one thing.

4. Changes in Demand PRICE
Movement along the demand curve is called an increase or decrease in the quantity demanded.
$100 •
$80 •
$60 •
$40 •
$20 • D1
QUANTITY

5. Shifts in Demand PRICE $100 • • $80 • • $60 • • $40 • • $20 • • D1 D2
Quantity Demanded
$100 7
$80 11
$60 15
$40 19
$20 22
PRICE
$100 • •
$80 • •
$60 • •
$40 • •
A movement of the entire demand curve is called a shift in demand.
$20 • • D1 D2
QUANTITY

6. Causes for the Shift in Demand
1. Income
Normal goods – goods that consumers demand more of when their income increases
For an increase in demand the demand curve shifts to the right
For a decrease in demand the demand curve shifts to the left
Inferior goods – goods that consumers demand less of when their income increases
Used cars or generic foods

7. Causes for the Shift in Demand
2. Consumer Expectations
Current demand for a good is positively related to its expected future price
If you expect the price to rise your demand increases
If you expect the price to fall your demand decreases

8. Causes for the Shift in Demand
3. Population
A rise in the population will effect the demand of a certain good
Food, houses, cars…
4. Consumer tastes and advertising
Fads
Advertising makes you want something

9. Prices of Related Goods
Demand can be affected by the change in the price of another good
Compliments – two goods that are bought and used together
Substitutes goods used in place of one another