02 substitutes income effect
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

02 substitutes income effect

on

  • 334 views

 

Statistics

Views

Total Views
334
Views on SlideShare
334
Embed Views
0

Actions

Likes
0
Downloads
7
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment
  • In each case, there are only three possible answers: - The curve shifts to the right - The curve shifts to the left - The curve does not shift (though there may be a movement along the curve)
  • Point out to your students that there are no numbers or units on either axis, and we are using “P 1 ” and “Q 1 ” to represent the initial price and quantity, rather than specific numerical values. Tell them that this is common, because in much economic analysis, the goal is only to see the direction of changes, not specific amounts. (Besides, if we put numbers on this graph, they’d just have been made up, so why bother?) Also point out the following: The price of music downloads is the same, but the quantity demanded is now higher. In fact, this is the nature of a shift in a curve: at any given price, the quantity is different than before.

02 substitutes income effect Presentation Transcript

  • 1. Opening BellThink back to your business idea from entrepreneurship week.1. Who are your customers?2. How often do they buy your goods/services?3. Are there any other products that people would buy along with your products?
  • 2. 2 important effects “complements” – a good that is purchased with another “substitutes” – a good which can be substituted for another Substitution effect - Changes to prices of similar goods changes people’s demand Normal goods – goods you buy more of when your income increases Inferior goods – goods you buy less of when your income increases Income Effect – changes to a person’s income changes their demand
  • 3. Why is this important for firms?
  • 4. What sorts of goods are these? Others? Compliments? Normal/Inferior?
  • 5. Cultural? Preferences change Spam in Hawaii Sauerkraut at Pueblo
  • 6. On your bellringer paper4. List 3 normal goods5. List 3 inferior goods6. List 3 pairs of substitutes7. List 3 pairs of compliments
  • 7. Changes to demandDoes Demand change when the price of a good changes?Only the Quantity demanded changes with priceReview:What is the Q*D at Price = $1.50?When Q*D is at 50, what is the price?
  • 8. Graphically speaking… Demand of movie tickets $ A RAISE!!!! D after raise D* A Child!!!! Quantity
  • 9. Determinants of Demand Causes that will change Demand
  • 10. Determinants of Demand Changes to tastes and preferences
  • 11. Determinants of Demand Changes to income
  • 12. Determinants of Demand Availability and price of substitute goods
  • 13. Determinants of Demand Availability and price of compliments
  • 14. Determinants of Demand Changes to population
  • 15. Determinants of Demand Expectations of the Future
  • 16. A trick to remember determinants of demand TRIBE T = tastes of consumers R = Related goods (P$ change) I = Income of buyers B = # of consumers E = expectations of futurehttp://quizlet.com/2043838/individual-markets-flash-cards/
  • 17. Graphically speaking… Demand of movie tickets $ A RAISE!!!! D after raise D* A Child!!!! Quantity
  • 18. A C T I V E L E A R N I N G 1Demand CurveDraw a demand curve for music downloads.What happens to it in each ofthe following scenarios? Why?A. The price of iPods fallsB. The price of music downloads fallsC. The price of CDs falls 27
  • 19. A C T I V E L E A R N I N G 1 A. Price of iPods falls Music downloads Music downloadsPrice of and iPods are and iPods are music down- complements. complements. loads A fall in price of A fall in price of iPods shifts the iPods shifts the P1 demand curve for demand curve for music downloads music downloads to the right. to the right. D1 D2 Q1 Q2 Quantity of music downloads 28
  • 20. A C T I V E L E A R N I N G 1 B. Price of music downloads fallsPrice of music The D curve The D curve down- does not shift. does not shift. loads Move down along Move down along P1 curve to a point with curve to a point with lower P, higher Q. lower P, higher Q. P2 D1 Q1 Q2 Quantity of music downloads 29
  • 21. A C T I V E L E A R N I N G 1 C. Price of CDs fallsPrice of CDs and CDs and music music downloads music downloads down- are substitutes. are substitutes. loads A fall in price of CDs A fall in price of CDs P1 shifts demand for shifts demand for music downloads music downloads to the left. to the left. D2 D1 Q2 Q1 Quantity of music downloads 30
  • 22. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift
  • 23. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift
  • 24. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift
  • 25. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift
  • 26. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift
  • 27. On a separate sheet of paper Graphically sketch the changes to the demand curve Label your graphs $1. New residents move to Arizona (houses)2. You are downsized (steak)3. The price of buns increases (hot dogs)4. The internet crashes (itunes mp3’s)5. You are downsized (studio apartments)6. You get a raise at work (used clothing) Q7. You go to college (text books)8. You get a raise at work (Hawaiian cruises)9. The price of meat increases (A1 steak sauce)10. The price of Fiji Water increases (tap water)11. Gas prices increase to $6.50/gallon (bicycles)12. Toxic waste dump found in Tempe (ASU degrees)13. Make up your own example and show demand shift