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03 wed changes to demand

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03 wed changes to demand

  1. 1. Bellringer ON SLATES 1. Graph and correctly label this demand schedule Price Movie tickets Per night $15 1000 $12.50 2000 $10 4000 $7.50 7000 2. What economic concept is this graphic showing?
  2. 2. Using the law of demand, what would an economist predict about this
  3. 3. Review of Law of Demand • What happens in the following situations? • The price of college tuition increases? • The price of blue ray DVD players decreases? • The price of Eegees drinks increases? • Effect on other goods/services?
  4. 4. DEMAND CHANGE VOCABULARY • “substitutes” – a good which can be substituted for another • “complements” – a good that is purchased with another • Substitution Effect changes to the price of one good causes a buyer to buy more of the another good and vice versa. The buyer substitutes consumption of the second good for consumption of the first. • 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
  5. 5. Why is this important for firms?
  6. 6. What sorts of goods are these? Others? Compliments? Normal/Inferior?
  7. 7. Cultural? • Preferences change • Spam in Hawaii • Sauerkraut at Pueblo
  8. 8. 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?
  9. 9. Show +/- framework
  10. 10. Quantity $ Graphically speaking… Demand of movie tickets D* A RAISE!!!! A Child!!!! D after raise
  11. 11. Determinants of Demand • Changes to tastes and preferences
  12. 12. Determinants of Demand • Changes to income
  13. 13. Determinants of Demand • Availability and price of substitute goods
  14. 14. Determinants of Demand • Availability and price of compliments
  15. 15. Determinants of Demand • Changes to population
  16. 16. Determinants of Demand • Expectations of the Future PRICE
  17. 17. Future price forcasts Tomato market: Analysts announce tomato prices will decrease in 2016 Electronics market: Its November 2
  18. 18. A trick to remember determinants of demand • TRIBE T = tastes of consumers R = Related goods (P$ change) I = Income of consumers B = # of consumers E = expectations of future http://quizlet.com/2043838/individual-markets-flash-cards/
  19. 19. Quantity $ Graphically speaking… Demand of movie tickets D* A RAISE!!!! A Child!!!! D after raise
  20. 20. A. The price of iPods falls B. The price of music downloads falls C. The price of CDs falls A C T I V E L E A R N I N GA C T I V E L E A R N I N G 11 Demand CurveDemand Curve 31 Draw a demand curve for music downloads. What happens to it in each of the following scenarios? Why?
  21. 21. A C T I V E L E A R N I N GA C T I V E L E A R N I N G 11 A. Price of iPods fallsA. Price of iPods falls 32 Q2 Price of music down- loads Quantity of music downloads D1 D2 P1 Q1 Music downloads and iPods are complements. A fall in price of iPods shifts the demand curve for music downloads to the right. Music downloads and iPods are complements. A fall in price of iPods shifts the demand curve for music downloads to the right.
  22. 22. A C T I V E L E A R N I N GA C T I V E L E A R N I N G 11 B. Price of music downloads fallsB. Price of music downloads falls 33 The D curve does not shift. Move down along curve to a point with lower P, higher Q. The D curve does not shift. Move down along curve to a point with lower P, higher Q. Price of music down- loads Quantity of music downloads D1 P1 Q1 Q2 P2
  23. 23. A C T I V E L E A R N I N GA C T I V E L E A R N I N G 11 C. Price of CDs fallsC. Price of CDs falls 34 P1 Q1 CDs and music downloads are substitutes. A fall in price of CDs shifts demand for music downloads to the left. CDs and music downloads are substitutes. A fall in price of CDs shifts demand for music downloads to the left. Price of music down- loads Quantity of music downloads D1D2 Q2
  24. 24. TRIBE Assignment For each part of the: Formulate two scenarios and graph For example: Beef market Consumers see news story about mad cow disease Due start of class Friday, work on during class Thurs AFTER reading

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