1. SHIFTS IN DEMAND Mr. Barnett University High 2012-2013 AP Microeconomics

2.  Demand – schedule of quantities of goods or services that will be purchased at various prices, at a specified time, all other things held constant  Those “things” being held constant are the determinants of demand  Number of consumers  Income normal goods  Income inferior goods  Consumer tastes and preferences  Prices of related products – Substitutes  Prices of related products – Complements  Expected future prices by consumer  Expected future income by consumer  As we all know, the demand of goods or services change over time  These changes cause shifts in the demand curve  An increase in demand is shown by a shift to the right  A decrease in demand is shown by a shift to the left

3. EQUILIBRIUM  If we put up a supply and demand curve at the same time …  Equilibrium – when market price has reached level where quantity supplied equals quantity demanded  Equilibrium price – price where quantity supplied meets quantity demanded  Equilibrium quantity – quantity supplied and quantity demanded at the equilibrium price  Shifts in curves will change equilibrium price/quantity

4. NUMBER OF CONSUMERS  Can change because of various reasons  Population  If 5 new families move into your neighborhood  If the local school begins classes  Weather  An incredibly hot September  A extremely cold November

5. INCOME NORMAL GOODS  Number of consumers increases  Shift right  Number of consumers decreases  Shift left

6. INCOME NORMAL GOODS  Normal good – a good where an increase in income leads to an increase in demand  Inferior good – a good where an increase in income leads to a decrease in demand  As people’s incomes increase, they tend to buy more normal goods  As people’s incomes decrease, they tend to buy more inferior goods

8. INCOME NORMAL GOODS  Increase in income - impact on normal goods  Shift right  Decrease in income – impact on normal goods  Shift left  Increase in income – impact on inferior goods  Shift left  Decrease in income – impact on normal goods  Shift right

9. PREFERENCES & TASTES  When consumers have a change in preference or tastes, the demand for the good changes accordingly  Oprah’s book club  Medical studies

10. PREFERENCES AND TASTES  Increase in preference  Shift right  Decrease in preference  Shift left

11. SUBSTITUTES  Prices of related products – Substitutes  As price of product x rises, its quantity demanded decreases  Demand for product y increases  As price of product x falls, its quantity demanded increases  Demand for product y decreases

12. SUBSTITUTES  Prices of related products – Complements  As price of product x rises, its quantity demanded decreases  Demand for product y decreases as well  As price of product x falls, its quantity demanded increases  Demand for product y increases as well

13. SUBSTITUTES  Expected future prices by consumer  If people expect prices to go up, demand _____  Increases; shift to the right  If people expect prices to go down, demand _____  Decreases; shift to the left  Expected future income by consumer  If people expect their income to go up, demand _____  Increases; shift to the right  If people expect their future income to go down, demand _____  Decreases; shift to the left