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Determinants of
Demand
Review: Change in QuantityReview: Change in Quantity
DemandedDemanded
Quantity
Price
D1
On to … Determinants of Demand
DETERMINANTS OF DEMAND
Changes in income
Changes in the prices of related goods
 Substitutes: goods that can replace on...
Practice Problem #1
What would happen to the demand of
pizza if you find out pizza causes
heart disease?
• Determinant?
• ...
Answer to Practice Problem #1
What would happen to the demand
for pizza if you find out that pizza
causes heart disease?
•...
Practice Problem #2
What would happen to the demand of Nike
shoes if it is the favorite shoe of many
sports celebrities?
•...
Answer to Practice Problem #2
What would happen to the demand of Nike
shoes if it is the favorite shoe of many
sports cele...
Practice Problem #3
•A new energy drink comes to
market that does not have
negative side effects (e.g., jitters,
crashes)....
Answer to Practice Problem #3
• A new energy drink comes to market
that does not have negative side
effects (e.g., jitters...
Practice Problem # 4
•Student allowances and the
minimum wage for work
increases.
• Determinant?
• Increase or decrease in...
Practice Problem # 4
•Student allowances and the
minimum wage for work
increases.
• Determinant – Income increase
• Increa...
Movement Along a Demand Curve
Versus a Shift of the Curve
• Remember there is a difference between quantity
demanded and d...
What determinants would
increase the market
demand for pizza?
Determinants Increasing Demand
• Increases in income
• Increases in population
• Increase in prices of substitute goods
• ...
Determinants of increased demand change
the story….. How so?
Quantity
demanded of
pizza per week
(by millions)
Price of pi...
8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
How would determinants of increased demand
chang...
8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
Increased Market Demand for Pizza
D2
fb
What determinants would
decrease the market
demand for pizza?
Determinants Decreasing Demand
• Decreases in income
• Decreases in population
• Decrease in prices of substitute goods
• ...
Determinants of decreased demand change
the story….. How so?
Quantity
demanded of
pizza per week
(by millions)
Price of pi...
8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
How would determinants of decreased demand
chang...
b
D2
Decreased Market Demand for Pizza
8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
j
D1
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Unit 2 lesson 2 presentation

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Unit 2 lesson 2 presentation

  1. 1. Determinants of Demand
  2. 2. Review: Change in QuantityReview: Change in Quantity DemandedDemanded Quantity Price D1
  3. 3. On to … Determinants of Demand
  4. 4. DETERMINANTS OF DEMAND Changes in income Changes in the prices of related goods  Substitutes: goods that can replace one another  Compliments: goods that are consumed together Changes in the size or composition of the population Change in price expectations Changes in tastes/preferences
  5. 5. Practice Problem #1 What would happen to the demand of pizza if you find out pizza causes heart disease? • Determinant? • Increase or decrease in demand?
  6. 6. Answer to Practice Problem #1 What would happen to the demand for pizza if you find out that pizza causes heart disease? • Determinant - A change in consumer tastes/preferences; consumer expectations • Decrease in demand
  7. 7. Practice Problem #2 What would happen to the demand of Nike shoes if it is the favorite shoe of many sports celebrities? • Determinant? • Increase or decrease in demand?
  8. 8. Answer to Practice Problem #2 What would happen to the demand of Nike shoes if it is the favorite shoe of many sports celebrities? • Determinant – A change in consumer tastes/preferences • Increase in demand
  9. 9. Practice Problem #3 •A new energy drink comes to market that does not have negative side effects (e.g., jitters, crashes). • Determinant? • Increase or decrease in demand of Red Bull?
  10. 10. Answer to Practice Problem #3 • A new energy drink comes to market that does not have negative side effects (e.g., jitters, crashes). • Determinant – A related good (substitute) • Decrease in demand of Red Bull
  11. 11. Practice Problem # 4 •Student allowances and the minimum wage for work increases. • Determinant? • Increase or decrease in demand of video games?
  12. 12. Practice Problem # 4 •Student allowances and the minimum wage for work increases. • Determinant – Income increase • Increase in demand of video games
  13. 13. Movement Along a Demand Curve Versus a Shift of the Curve • Remember there is a difference between quantity demanded and demand. • Markets never stand still, there are always outside factors that change the actual price of the good or how much is demanded altogether. • A change price creates a change in the quantity demanded, other things constant. ▫ This causes a movement along the demand curve. • A change in one of the determinants of demand causes a change in demand. ▫ This causes in a shift of a demand curve. Or a new curve.
  14. 14. What determinants would increase the market demand for pizza?
  15. 15. Determinants Increasing Demand • Increases in income • Increases in population • Increase in prices of substitute goods • Decrease in price of complement goods • Consumer expectation that prices will increase in the future • Improvement in taste • Increased consumer preferences
  16. 16. Determinants of increased demand change the story….. How so? Quantity demanded of pizza per week (by millions) Price of pizza 15 $15.00 20 $12.00 25 $9.00 30 $6.00 35 $3.00 --- $0.00 Quantity demanded of pizza per week (by millions) Price of pizza 9 $15.00 14 $12.00 19 $9.00 25 $6.00 30 $3.00 --- $0.00 Original Story New Story
  17. 17. 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 0 Priceperpizza D1 How would determinants of increased demand change the picture of demand? b
  18. 18. 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 0 Priceperpizza D1 Increased Market Demand for Pizza D2 fb
  19. 19. What determinants would decrease the market demand for pizza?
  20. 20. Determinants Decreasing Demand • Decreases in income • Decreases in population • Decrease in prices of substitute goods • Increase in price of complement goods • Consumer expectation that prices will decrease in the future • Deterioration of taste • Decreased consumer preferences
  21. 21. Determinants of decreased demand change the story….. How so? Quantity demanded of pizza per week (by millions) Price of pizza 5 $15.00 10 $12.00 15 $9.00 20 $6.00 25 $3.00 --- $0.00 Quantity demanded of pizza per week (by millions) Price of pizza 9 $15.00 14 $12.00 19 $9.00 25 $6.00 30 $3.00 --- $0.00 Original Story New Story
  22. 22. 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 0 Priceperpizza D1 How would determinants of decreased demand change the picture of demand? b
  23. 23. b D2 Decreased Market Demand for Pizza 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 0 Priceperpizza j D1

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