Factors Affecting Demand

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demand determinants

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Factors Affecting Demand

  1. 1. Factors Affecting Demand
  2. 2. The Law of Demand <ul><li>When the price of something goes up, the demand for it will go down </li></ul><ul><li>When the price of something goes down, the demand for it will go up </li></ul><ul><li>Price goes Demand goes </li></ul><ul><li>Price goes Demand goes </li></ul>
  3. 3. <ul><li>If prices were to stay the same, what then could change demand? </li></ul>
  4. 4. 1) Consumer Income <ul><li>If consumer income increases, demand will increase (having more money means people will spend more money) </li></ul>
  5. 5. Consumer Income… continued <ul><li>Consumer income can increase in two ways: </li></ul><ul><li>1) Wages increase </li></ul><ul><li>2) Prices for goods & services decrease </li></ul>
  6. 6. 2)Consumer Tastes <ul><li>Consumer tastes are shaped by the way products are marketed (advertised) to them </li></ul><ul><li>If an advertising campaign is particularly successful, people tend to buy more of a product, this often means companies can charge a little more for their product. (think designer clothing & luxury cars) </li></ul>
  7. 7. Consumer taste <ul><li>Consumer tastes may also be shaped by new trends. </li></ul>
  8. 8. 3) Substitutes <ul><li>The demand for a product tends to decrease if the price of its substitute decreases </li></ul><ul><li>What are some substitute products? </li></ul>
  9. 9. Substitutes <ul><li>If the price of butter goes up, then the demand for margarine will go up. </li></ul><ul><li>If the price of sugar goes up, then the demand for Splenda© will go up </li></ul>
  10. 10. 4) Compliments <ul><li>Compliments are goods that are related. You need to have both in order to use them </li></ul>
  11. 11. Compliments
  12. 12. Compliments <ul><li>If the price of DVD players goes down, then the demand for DVD’s goes up </li></ul><ul><li>If the price of Gillette razor handles goes up, then the demand for the razor blades goes down </li></ul>
  13. 13. 4) Change in Expectations <ul><li>The way people feel about the future of a product. </li></ul>
  14. 14. Expectations <ul><li>If GM announces they will release a new sporty, cheap electric car in December 2009, then the demand for gas powered cars will decrease. </li></ul>
  15. 15. Expectations <ul><li>If the FDA were to announce a Mad Cow disease warning in America, then the demand for chicken & pork would increase </li></ul>
  16. 16. Homework <ul><li>Read pages 95-99 </li></ul><ul><li>Answer questions 1-4 on page 99 </li></ul><ul><li>Don’t whine, you didn’t even have to take notes today. </li></ul>
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