1 / 23

Determinants of Demand

Determinants of Demand. Review: Change in Quantity Demanded. Price. D1. Quantity. On to … Determinants of Demand. DETERMINANTS OF DEMAND. Changes in income Changes in the prices of related goods Substitutes: goods that can replace one another

ryder-larson
Télécharger la présentation

Determinants of Demand

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Determinants of Demand

  2. Review: Change in Quantity Demanded Price D1 Quantity

  3. On to … Determinants of Demand

  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. 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. 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. Practice Problem #2 What would happen to the demand of Nike shoesif it is the favorite shoe of many sports celebrities? • Determinant? • Increase or decrease in demand?

  8. Answer to Practice Problem #2 What would happen to the demand of Nike shoesif it is the favorite shoe of many sports celebrities? • Determinant – A change in consumer tastes/preferences • Increase in demand

  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. 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. Practice Problem # 4 • Student allowances and the minimum wage for work increases. • Determinant? • Increase or decrease in demand of video games?

  12. Practice Problem # 4 • Student allowances and the minimum wage for work increases. • Determinant – Income increase • Increase in demand of video games

  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. Achange in one of the determinants of demandcauses a change in demand. This causes in a shift of a demand curve. Or a new curve.

  14. What determinants would increase the market demand for pizza?

  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. Determinants of increased demand change the story….. How so? Original Story New Story

  17. How would determinants of increased demand change the picture of demand? $15 12 b 9 Price per pizza 6 3 0 D1 8 14 20 26 32 Millions of pizzas per week

  18. Increased Market Demand for Pizza $15 12 b f 9 Price per pizza 6 3 0 D1 8 14 20 26 32 Millions of pizzas per week D2

  19. What determinants would decrease the market demand for pizza?

  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. Determinants of decreased demand change the story….. How so? Original Story New Story

  22. How would determinants of decreased demand change the picture of demand? $15 12 b 9 Price per pizza 6 3 0 D1 8 14 20 26 32 Millions of pizzas per week

  23. Decreased Market Demand for Pizza $15 j b 12 9 Price per pizza 6 3 0 D2 D1 8 14 20 26 32 Millions of pizzas per week

More Related