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03 wed changes to demand
The document discusses the economic concept of demand, including the determinants of demand and how demand curves shift in response to changes in price and other factors. It specifically addresses how demand for a good is affected by changes in the prices of substitutes and complements, as well as by changes in consumer tastes, income, population, and expectations about future prices. Graphs and examples are provided to illustrate these concepts.
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03 wed changes to demand
- 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. Using the lawof demand, what would an economist predict about this
- 3. Review of Lawof 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. 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. Why is thisimportant for firms?
- 6. What sorts ofgoods are these? Others? Compliments? Normal/Inferior?
- 10. Cultural? • Preferences change •Spam in Hawaii • Sauerkraut at Pueblo
- 18. Changes to demand DoesDemand 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?
- 19.
- 20. Quantity $ Graphically speaking… Demandof movie tickets D* A RAISE!!!! A Child!!!! D after raise
- 21. Determinants of Demand •Changes to tastes and preferences
- 22. Determinants of Demand •Changes to income
- 23. Determinants of Demand •Availability and price of substitute goods
- 24. Determinants of Demand •Availability and price of compliments
- 25. Determinants of Demand •Changes to population
- 26. Determinants of Demand •Expectations of the Future PRICE
- 28. Future price forcasts Tomatomarket: Analysts announce tomato prices will decrease in 2016 Electronics market: Its November 2
- 29. A trick toremember 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/
- 30. Quantity $ Graphically speaking… Demandof movie tickets D* A RAISE!!!! A Child!!!! D after raise
- 31. A. The priceof 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?
- 32. A C TI 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.
- 33. A C TI 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
- 34. A C TI 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
- 35. TRIBE Assignment For each partof 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
Editor's Notes
- #32 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)
- #33 Point out to your students that there are no numbers or units on either axis, and we are using “P1” and “Q1” 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.