3.2 Changes in Demand Introduction to Economics – Gr. 12 Text: Holt Economics Mr Ahmed Keshk
<ul><li>Do you believe there are factors other than price which affect change in demand for goods and services?  Write a l...
<ul><li>The demand curve is a snapshot of the market during a specific period of time.   </li></ul><ul><li>Since this pict...
<ul><li>Period of time allows other factors than price to influence demand significantly – in economic terms – to shift th...
<ul><li>(Non-price factors that cause shifts in demand) </li></ul><ul><li>Consumer Tastes and Preferences. </li></ul><ul><...
<ul><li>Changes in consumer tastes and preference can have a major effect on demand for products. </li></ul>
<ul><li>As a market expands, it has more consumers than before creating a greater potential demand and if it contracts, it...
<ul><li>Income  Spending  Demand  Demand Curve </li></ul><ul><li>Income  Spending  Demand  Demand Curve </li></ul><ul><li>...
<ul><li>Change in Income VS Income Effect </li></ul><ul><li>The  income effect  deals with changes in consumers'  purchasi...
<ul><li>Demand for a good is often connected to demand for related goods.  This means that  changes in a product's price c...
<ul><li>Substitute Goods  are goods that can be used to replace similar goods when prices rise.  An increase in a products...
 
<ul><li>Complementary Goods   are goods that are commonly used with others goods.  An increase in a product's price causes...
 
 
<ul><li>If consumers anticipate higher future income, they would probably shift demand to the right. </li></ul><ul><li>If ...
<ul><li>In your binders, write the answers to the following. </li></ul><ul><li>Explain how a change in the price of a prod...
<ul><li>Complete Challenge/Enrichment Activity 3. </li></ul>
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3.2 changes in demand

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3.2 changes in demand

  1. 1. 3.2 Changes in Demand Introduction to Economics – Gr. 12 Text: Holt Economics Mr Ahmed Keshk
  2. 2. <ul><li>Do you believe there are factors other than price which affect change in demand for goods and services? Write a list of such factors. </li></ul>
  3. 3. <ul><li>The demand curve is a snapshot of the market during a specific period of time. </li></ul><ul><li>Since this picture is taken at a single point in time, the only factor affecting the demand is price . This means that – at the time - nothing but a change in price could have caused a change in the quantity demanded . </li></ul><ul><li>↑ or ↓ in price will cause the intersection of the price and QD to move to a new point along the demand curve. </li></ul>
  4. 4. <ul><li>Period of time allows other factors than price to influence demand significantly – in economic terms – to shift the entire demand of a product to the right or left instead of simply causing movement along the demand curve. </li></ul><ul><li>Shift to the right  </li></ul><ul><li>increase in demand </li></ul><ul><li>Shift to the left  </li></ul><ul><li>decrease in demand </li></ul><ul><li>A right or left shift in the curve means that a different quantity of the product is demanded at each and every price . </li></ul>
  5. 5. <ul><li>(Non-price factors that cause shifts in demand) </li></ul><ul><li>Consumer Tastes and Preferences. </li></ul><ul><li>Market Size. </li></ul><ul><li>Income. </li></ul><ul><li>Prices of Related Goods. </li></ul><ul><li>Consumer Expectations. </li></ul>
  6. 6. <ul><li>Changes in consumer tastes and preference can have a major effect on demand for products. </li></ul>
  7. 7. <ul><li>As a market expands, it has more consumers than before creating a greater potential demand and if it contracts, it loses consumers, creating a smaller potential demand. </li></ul><ul><li>Market Size Demand Demand Curve </li></ul><ul><li>Market Size Demand Demand Curve </li></ul><ul><li>Markets expand and contract for several reasons: </li></ul><ul><ul><li>Decisions by private business. </li></ul></ul><ul><ul><li>Governments' policy decisions. </li></ul></ul><ul><ul><li>New technology (creating new products and markets at the expense of older ones) </li></ul></ul>
  8. 8. <ul><li>Income Spending Demand Demand Curve </li></ul><ul><li>Income Spending Demand Demand Curve </li></ul><ul><li>Although demand for most goods increases as income rises, a few exceptions exist, i.e., income effect working in reverse (e.g., the higher-priced kabab is purchased rather than the lower-priced falafel). </li></ul>
  9. 9. <ul><li>Change in Income VS Income Effect </li></ul><ul><li>The income effect deals with changes in consumers' purchasing power caused by a change in a product's price (resulting in a change in quantity demanded or movement along the demand curve ). </li></ul><ul><li>A change in person's income , however, brings a different amount of money to a household (resulting in a total shift in the demand curve as more of the product is bought at the same price ). </li></ul>
  10. 10. <ul><li>Demand for a good is often connected to demand for related goods. This means that changes in a product's price can affect demand for the product's related goods . </li></ul><ul><li>There are two types of related goods: </li></ul><ul><ul><li>Substitute Goods. </li></ul></ul><ul><ul><li>Complementary Goods. </li></ul></ul>
  11. 11. <ul><li>Substitute Goods are goods that can be used to replace similar goods when prices rise. An increase in a products price leads to an increase in demand for the product's substitute. The tendency of consumers to substitute a similar, low priced product for another product that is relatively more expensive. This is called the substitution effect. </li></ul><ul><li>Example (beef & chicken): </li></ul><ul><li>Price of Beef QD Beef Demand for Chicken Demand Curve Chicken </li></ul><ul><li>  </li></ul>
  12. 13. <ul><li>Complementary Goods are goods that are commonly used with others goods. An increase in a product's price causes a decrease in demand for that product's complementary goods. </li></ul><ul><li>Example (paint & paintbrushes): </li></ul><ul><li>Price of Paint QD Paint Demand of Brushes </li></ul><ul><li>Demand Curve Brushes </li></ul><ul><li>(The effect of a price change on a product's complementary goods is the opposite of the effect of such a change on that product's substitute goods.) </li></ul>
  13. 16. <ul><li>If consumers anticipate higher future income, they would probably shift demand to the right. </li></ul><ul><li>If consumers are pessimistic about their future income, the overall demand for goods and services in the economy decreases. </li></ul>
  14. 17. <ul><li>In your binders, write the answers to the following. </li></ul><ul><li>Explain how a change in the price of a product affects demand for its substitute goods and its complementary goods. </li></ul><ul><li>How is a shift in demand different from a change in the quantity demanded? </li></ul><ul><li>Name the 5 main determinants that can cause shifts in demand. Give at least two examples of howeach of these determinants have affected your demand for a product. </li></ul>
  15. 18. <ul><li>Complete Challenge/Enrichment Activity 3. </li></ul>

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