Economics Unit 4, Lesson 1 Demand Change in QD or Change in D
Objectives 1. Understand the difference between a change in demand and a change in quantity demanded. 2. Identify the determinants of a change in demand and quantity demanded. 3. Graph a change in D and QD.
Change in Quantity Demanded A change in quantity demanded is caused by a change in price. This is the only reason for a change in quantity demanded.
P P 1 D Q 1 Q
Change in Quantity Demanded Since the demand curve shows the quantity demanded at all prices if price is the only thing that changes, then our demand curve is still valid and we can show this change by simply moving along the demand curve.
P P 2 P 1 D Q 2 Q 1 Q QD
Change in Demand
If one of the conditions changes, willingness or financial ability of people to buy different amounts of goods and services, we see a change in demand at each and every price level. The original demand curve is no longer valid. We must have a new demand curve. This is called a shift of the demand curve.
The entire demand curve shifts. Increase in Demand P D 1 Q
The entire demand curve shifts. Increase in Demand P D 1 D 2 Q Shift Right
The entire demand curve shifts. Increase in Demand Decrease in Demand P P D 1 D 2 D 1 Shift Right Q Q
The entire demand curve shifts. P Increase in Demand Decrease in Demand P D 1 D 2 D 2 D 1 Shift Right Q Shift Left Q
1. Change in Consumer Taste or Preference
1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc.
1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc. The good becomes more popular, so the curve: Shifts Right
1. Change in Consumer Taste or Preference Includes advertising, news reports, trends, etc. Or If the good becomes unpopular, the curve will: Shift Left
2. Change in Consumer Income
2. Change in Consumer Income Income Demand at each and every price level Shift Right Income Demand at each and every price level Shift Left (if the good is a normal good)
3. Change in Market Size or Number of Buyers or Groups Within the Population
3. Change in Market Size or Number of Buyers or Groups Within the Population Market Size Market Size Demand Shift Right Demand Shift Left
4. Change in Consumer Expectations about Price
4. Change in Consumer Expectations If buyers think price will go up in the future, then demand Shift Right now If buyers think price will go down in the future, then demand Shift Left now
5. Change in Price of Related Goods There are two types of related goods.
5. Change in Price of Related Goods A. Substitute - can use one good in place of another
5. Price of Related Goods A. Substitute - can use one good in place of another Price of butter, then demand for margarine?
5. Price of Related Goods A. Substitute - can use one good in place of another Price of butter, then demand for margarine. Shift Right
5. Price of Related Goods B. Complement - one good used with another good
5. Price of Related Goods B. Complement - one good used with another good Price of milk, then the demand for cookies?
5. Price of Related Goods B. Complement - one good needed to use another good Price of milk, then the demand for cookies. Shift Left
This might help you remember these reasons. TIMER Change in consumer Taste Change in consumer Income Change in Market Size or buyers Change in consumer Expectations Change in price of Related Goods