1. ECONOMICS CHAPTER 3, SECTION 2 Changes in Demand

2. I. Demand Shifts A. With the passage of time, factors other than price (non-price factors) can affect demand for a good or service.

3. I. Demand Shifts B. The result of non-price factors affecting demand is that the entire demand curve shifts either to the right or to the left.

4. I. Demand Shifts P Q

5. I. Demand Shifts C. This means that quantity demanded changed at every price.

6. II. Increases and Decreases in Demand A. An INCREASE in demand shifts the entire demand curve to the RIGHT. I. Demand Shifts P D1 D2 Q

7. II. Increases and Decreases in Demand B. A DECREASE in demand shifts the entire demand curve to the LEFT. I. Demand Shifts P D1 D2 Q

8. III. Determinants of Demand A. There are five non-price factors which determine demand for a good or service: 1. Consumer Taste and Preference 2. Market Size 3. Income 4. Prices of Related Goods 5. Consumer Expectations

9. 1. Consumer Taste and Preference Consumers’ taste and preference for comfort, quality, trends, holidays, seasons, etc. can have an effect on demand. Ex.

10. 2. Market Size Changes in the size of the market can have an effect on demand. Three factors can change market size:

11. 2. Market Size A. Decisions made by private businesses, ex. Production decisions, advertising campaigns, hiring practices, use of celebrities

12. 2. Market Size B. Government policies, ex. Regulations/laws, trade with foreign countries

13. 2. Market Size C. New technology, ex.

14. 3. Income Changes in consumers’ income can have an effect on demand. Ex. Losing a job, getting a pay raise, being promoted

15. 4. Prices of Related Goods The demand for a good or service can be affected by the prices of related goods There are two types of related goods:

16. 4. Prices of Related Goods A. Substitute goods are goods that can be used to replace a similar good Ex. P of original good increases, D for substitute good increases P of original good decreases, D for substitute good decreases

17. 4. Prices of Related Goods B. Complementary goods are goods that are usually used together Ex. P of original good increases, D for complement good decreases P of original good decreases, D for complement good increases

18. 5. Consumer Expectations Expectations of one’s future income can have an effect on demand. Ex.