Demand Shifters What is a change in demand

(Demand Shifters)

What is a change in demand? • Any change that alters the quantity demanded at every price. • A shift in the demand curve, either to the left or right.

Shifts in the Demand Curve Price of Ice-Cream Cone Increase in demand Decrease in demand D 1 D D 2 0 Quantity of Ice-Cream Cones

Demand Shifters: Tastes & Preferences of Consumers Income of Consumers Related Goods: Substitutes & Complements Expectations of Future Price Changes Size of population/Market

Tastes & Preferences of Consumers • As people’s tastes change in favor P of a good, or an effective advertising campaign has been waged, demand increases (shifts to the right). • As people’s tastes change against P a good, or a good loses popularity, demand decreases (shifts to the left). D D 1 Q D 1 D Q

Example: When Michael Jordan began endorsing the products, demand for Nike & Gatorade increased.

Income of Consumers • As income increases, consumer demand for goods and services increases (shifts to the right). • As income decreases, consumer demand for goods and services decreases (shifts to the left).

Example: When Billy got laid off from his job, his demand for gourmet steak dinners decreased.

Related Goods: Substitutes Substitute goods can be easily used in place of one another. • If two goods are SUBSTITUTES, when the price of Good A increases, demand for Good B increases (shifts to the right). • If two goods are SUBSTITUTES, when the price of Good A decreases, demand for Good B decreases (shifts to the left).

Example: Demand for Starbucks changes when Caribou alters its prices

Related Goods: Complements Complementary goods are used WITH each other. • If two goods are COMPLEMENTS, when the price of Good A increases, demand for Good B decreases (shifts to the left). • If two goods are COMPLEMENTS, when the price of Good A decreases, demand for Good B increases (shifts to the right).

Example: Demand for ketchup changes when hamburger prices fluctuate

Substitute OR Complementary? • Cars and Tires • Corn and Beans • DVD Players and DVD’s • Natural Gas and Electricity • Cereal and Milk • Toast and Jam • Sweatshirts and Sweaters

Expectations of Future Price Changes • If consumers expect the price of a good to rise in the future, immediate demand increases (shifts to the right). • If consumers expect the price of a good to decrease in the future, immediate demand decreases (shifts to the left).

Example: Demand for gas changes throughout the week

Size of Population/Market • As the number of consumers in a given market increases, demand increases (shifts to the right). • As the number of consumers in a given market decreases, demand decreases (shifts to the left).

Example: Demand for girl scout patches increases when more girls join girl scouts

Variables That Influence Buyers

“Analyzing Demand Headlines” Activity Instructions • Get into groups of 3 -4. • In this activity, you will work with your group to analyze a series of newspaper headlines. Based on information in each headline, you will investigate what happens to the demand curve for a related product.

Work with your group to analyze headlines that will likely affect demand by following these steps: 1. Carefully read one of the demand headlines. Determine whether the information will – Shift the entire curve to the left or to the right, or – Not shift the demand curve, but change the quantity demanded along the original curve.

On your worksheet… 1. Summarize the headline in the corresponding row. 2. Draw what will likely happen to the demand curve. 3. Explain what happened to the demand curve & why. – Cite & underline the shifter (TIRES), or explain why the curve did not shift, and whether quantity demanded increased or decreased. Wages Decline for U. S. Workers D 2 -Demand decreased (shifted left) -Income of consumers decreased

Have your work checked by the teacher. Then repeat the process with a new headline until AH are completed. 1. Summarize the headline in the corresponding row. 2. Draw what will likely happen to the demand curve. 3. Explain what happened to the demand curve & why.