This document contains lecture slides on the economic concept of demand. It discusses the key determinants of demand, including tastes, income, prices of substitutes and complements, population, and expectations of the future. It provides examples of how demand curves can shift with changes in these determinants. Specifically, it analyzes how the demand curve for music downloads would shift if the prices of iPods, music downloads, or CDs changed, based on whether they are substitutes or complements. The document emphasizes that demand is represented by a demand curve and that only quantity demanded changes along this curve with price, not demand itself. It also provides a framework for remembering the determinants of demand using the acronym "TRIBE

1. Bellringer
Graph and
correctly label
this demand
schedule
Price Movie tickets
Per night
$15 1000
$12.50 2000
$10 4000
$7.50 7000
What economic concept is
this graphic showing?
MANKIW
CHAPTER 4 ALL WEEK

2. 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?

3. 2 important effects
• Substitution Effect an increase in price of one good causes a
buyer to buy more of the other good, since the first good has
become relatively expensive, and vice versa. The buyer
substitutes consumption of the second good for consumption of
the first.
• “substitutes” – a good which can be substituted for another
• “complements” – a good that is purchased with another
• Income Effect – changes to a person’s income changes their
quantity demanded
• Normal goods – goods you buy more of when your income
increases
• Inferior goods – goods you buy less of when your income
increases

4. Why is this important for firms?

5. What sorts of goods are these?
Others?
Compliments?
Normal/Inferior?

9. Cultural?
• Preferences change
• Spam in Hawaii
• Sauerkraut at
Pueblo

17. 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?

18. Show +/- framework

19. Quantity
$
Graphically speaking… Demand of movie tickets
D*
A RAISE!!!!
A Child!!!!
D after raise

20. Determinants of Demand
• Changes to tastes and preferences

21. Determinants of Demand
• Changes to income

22. Determinants of Demand
• Availability and price of substitute goods

23. Determinants of Demand
• Availability and price of compliments

24. Determinants of Demand
• Changes to population

25. Determinants of Demand
• Expectations of the Future

26. 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/

27. Quantity
$
Graphically speaking… Demand of movie tickets
D*
A RAISE!!!!
A Child!!!!
D after raise

28. 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
28
Draw a demand curve for music downloads.
What happens to it in each of
the following scenarios? Why?

29. 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
29
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.

30. 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
30
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

31. 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
31
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

32. TRIBE
Assignment due next Fri
For each part of the:
Formulate two scenarios and graph
For example:
Beef market
Consumers see news story about
mad cow disease