2.  Demand- the desire to own something AND the ability to pay for it.  The Law of Demand PRICE GOES UP DEMAND GOES DOWN AND…. As price goes down, you demand more of something!

3.  Substitution Effect- When the price of one good rises, you demand less of that good, and demand more of another good.  Income Effect- If you buy fewer of one good without buying other goods because of rising prices.  Demand Schedule- table that lists the quantity of a good that a person will purchase at each price.

4.  A demand curve is accurate only as long as there are not changes other than price that could affect the consumer’s decision.  A store owner would choose what price and quantity combination from the list that would maximize profits, and produce that amount of goods.  Hold everything else constant.

5. 012345012345 0.5 1 1.5 2 2.5 3 Change in quantity demanded caused by a change in price is shown as a movement along a demand curve Price Quantity CHANGE IN QUANTITY DEMANDED

6. 012345012345 0.5 1 1.5 2 2.5 3 Price Quantity When we allow other factors to change, we no longer move along the demand curve, the ENTIRE demand curve shifts. CHANGE IN DEMAND Original Demand New Demand

7.  A change in the price of a good does not cause the demand curve to shift.  Income  Consumer Expectations  Consumer Tastes and Advertising  Population

8.  A consumers income affects his or her demand for most goods.  Most items that are purchased are normal goods- goods that consumers demand more of when their incomes increase.  Income increase from $50 to $75, buy more normal goods at every price level  Other goods are called inferior goods (A good that consumers demand less of when their incomes increase)  Generic cereal, used cars, used paperback books.

9.  Changes in the size of the population will also affect the demand for most products.  A rise in population will increase the demand for houses, food, and many other goods and services.  Over the next few decades, the market will face rising demand for the goods and services that are desired for senior citizens  Medical care, recreational vehicles…

10.  Our expectations about the future can affect our demand for certain goods today.  The current demand for a good is positively related to its expected future price.  If you expect the price of a TV to rise, your current demand will rise, which means you will buy the good sooner.  If you expect the price to drop, your current demand will fall and you will wait for the lower price.

11.  Certain Fads  Clever advertising campaigns, social trends, the influence of TV shows… or combined.  CHANGES IN TASTES AND PREFERENCES  Hope to increase the demand for their product—increasing money spent on advertising.

12.  The demand curve for one good can be affected by a change in the demand for another good.  Compliments- two goods that are bought and used together  Skis and ski boots  Substitutes- goods used in place of one another.  Skis and snowboards

13.  When the price of skis go up, the demand for ski boots fall. (demand shifts left)  When the price of skis go down, the demand for ski boots rise. (demand shifts right)  When the price of skis go up, the demand for snowboards go up. (demand shifts right)  When the price of skis go down, the demand for snowboards go down. (demand shifts left)