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Substitutes income effect

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  • 1. Bellringer ½ sheet 1. 3 items you will buy more of when you start making $25,000/year or more 2. 3 items you will buy less of when you start making $25,000/year or more 3. OPTIC for this graph: 4. Get out your notes
  • 2. Changes to demand Does Demand change when the price of a good changes? Only the Quantity demanded changes with price Review: What is the Q*D at Price = $1.50? When Q*D is at 50, what is the price? Revenue max?
  • 3. D
  • 4. D
  • 5. Demand changes over time
  • 6. Demand Vocab  “complements” – a good that is purchased with another  “substitutes” – a good which can be substituted for another  Substitution effect - Changes to prices of similar goods changes people’s demand  Normal goods – goods you buy more of when your income increases  Inferior goods – goods you buy less of when your income increases  Income Effect – changes to a person’s income changes their demand
  • 7. Why is this important for firms?
  • 8. What sorts of goods are these? Others? Compliments? Normal/Inferior?
  • 9. Cultural?  Preferences change  South Korea >>>>>
  • 10. At your tables 6. When would be a good time to sell normal goods? (when the economy is….?) 7. When would be a good time to sell inferior goods? (when the economy is…..?) 8. List two complements for tomatoes 9. List two substitutes for tomatoes
  • 11. Determinants of Demand  Causes that will change Demand
  • 12. Determinants of Demand  Changes to tastes and preferences
  • 13. Determinants of Demand  Availability and price of substitute goods
  • 14. Determinants of Demand  Availability and price of complements
  • 15. Determinants of Demand  Changes to income
  • 16. Determinants of Demand  Changes to population
  • 17. Determinants of Demand  Expectations of future price
  • 18. A trick to remember determinants of demand T R I B E T = tastes of consumers R = Related goods (P$ change) I = Income of buyers B = # of buyers E = expectations of future price http://quizlet.com/2043838/individual-markets-flash-cards/
  • 19. White boards Which part of TRIBE will change in the following scenarios to the Tucson movie theater market? 1. Average wage in Tucson increases 2. Price of DVDs & flat screen TVs decrease 3. Population of Tucson doubles 4. New Spiderman movie comes out 5. KOLD reports movie tickets will increase 15% in 2014 6. Xbox1 & PS4 hit the stores
  • 20. On a separate sheet of paper  Identify the changes to the demand for tomatoes Identify the part of TRIBE and increase or decrease or no change 1. New residents move to Arizona 2. Unemployment rises 3. The price of spaghetti noodles increase 4. Americans try eat healthier and eat more salads 5. Americans try eat healthier and eat less pizza 6. Price of tomatoes decreases 7. Average US income rises 8. Explosion at V8 juice facility 9. The price of ground beef decreases 10. Media reports salmonella outbreak from California tomatoes 11. Consumers expect tomato prices to increase next month 12. Salsa becomes #1 US condiment 13. Price of tortilla chips triples 14. Make up your own example and explain demand change