Factors that can affect demand include: 1) Consumer income - Demand increases when consumer income rises through higher wages or lower prices for other goods. 2) Consumer tastes - Demand may change when products are successfully marketed or new trends emerge. 3) Substitutes - Demand for one product falls when substitutes become cheaper. Lower butter prices increase demand for margarine. 4) Complements - Related goods see demand rise together; lower DVD player prices boost DVD demand.

1. Factors Affecting Demand

2. The Law of Demand When the price of something goes up, the demand for it will go down When the price of something goes down, the demand for it will go up Price goes Demand goes Price goes Demand goes

3. If prices were to stay the same, what then could change demand?

4. 1) Consumer Income If consumer income increases, demand will increase (having more money means people will spend more money)

5. Consumer Income… continued Consumer income can increase in two ways: 1) Wages increase 2) Prices for goods & services decrease

6. 2)Consumer Tastes Consumer tastes are shaped by the way products are marketed (advertised) to them If an advertising campaign is particularly successful, people tend to buy more of a product, this often means companies can charge a little more for their product. (think designer clothing & luxury cars)

7. Consumer taste Consumer tastes may also be shaped by new trends.

8. 3) Substitutes The demand for a product tends to decrease if the price of its substitute decreases What are some substitute products?

9. Substitutes If the price of butter goes up, then the demand for margarine will go up. If the price of sugar goes up, then the demand for Splenda© will go up

10. 4) Compliments Compliments are goods that are related. You need to have both in order to use them

11. Compliments

12. Compliments If the price of DVD players goes down, then the demand for DVD’s goes up If the price of Gillette razor handles goes up, then the demand for the razor blades goes down

13. 4) Change in Expectations The way people feel about the future of a product.

14. Expectations If GM announces they will release a new sporty, cheap electric car in December 2009, then the demand for gas powered cars will decrease.

15. Expectations If the FDA were to announce a Mad Cow disease warning in America, then the demand for chicken & pork would increase

16. Homework Read pages 95-99 Answer questions 1-4 on page 99 Don’t whine, you didn’t even have to take notes today.