Shifts of the Demand Curve Identify factors which

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Shifts of the Demand Curve Identify factors which can cause a demand curve to

Shifts of the Demand Curve Identify factors which can cause a demand curve to shift. Ceteris Paribus Shifts in the Demand Curve Factors that Cause a Demand Curve to Shift Complements BAUMAN 2019

While the price of a good influences a consumer’s decision to purchase, it is

While the price of a good influences a consumer’s decision to purchase, it is not the only factor. BAUMAN 2019

Ceteris Paribus • Ceteris Paribus - Latin meaning all other things are held constant.

Ceteris Paribus • Ceteris Paribus - Latin meaning all other things are held constant. • A demand curve assumes Ceteris Paribus or that only price is changing. It does not consider other factors that influence demand. BAUMAN 2019

As any parent will tell you, sometimes cereal is only bought for the toy

As any parent will tell you, sometimes cereal is only bought for the toy inside. BAUMAN 2019

Shifts in the Demand Curve • When a demand curve shifts, it moves. •

Shifts in the Demand Curve • When a demand curve shifts, it moves. • Price can never shift a demand curve because price is in the demand curve. • To shift a demand curve, it must be some factor other than price. BAUMAN 2019

D is the original demand curve D 1 is the demand curve after it

D is the original demand curve D 1 is the demand curve after it has shifted. Notice that by shifting to the left, demand has decreased at every price level. BAUMAN 2019

Here is a simple rule to remember: If the curve shifts left, left means

Here is a simple rule to remember: If the curve shifts left, left means less. Demand has decreased at every price level. If the curve shifts right, right means more. Demand has increased at every price level. BAUMAN 2019

Factors that Can Shift a Demand Curve Advertising Population Consumer Taste Consumer Expectations about

Factors that Can Shift a Demand Curve Advertising Population Consumer Taste Consumer Expectations about Future Prices The Price of Complements The Price of Substitutes

The Baby Boom generation increased demand for goods at all price levels. BAUMAN 2019

The Baby Boom generation increased demand for goods at all price levels. BAUMAN 2019

Advertising can increase demand at all price levels. BAUMAN 2019

Advertising can increase demand at all price levels. BAUMAN 2019

Complements are goods purchased together. If the price of the game system rises, people

Complements are goods purchased together. If the price of the game system rises, people will buy fewer games. BAUMAN 2019

If we think the price of a popular good will drop, we will buy

If we think the price of a popular good will drop, we will buy less and wait for the future lower price. BAUMAN 2019

Questions for Reflection: 1. State the Law of Demand. 2. What is the relationship

Questions for Reflection: 1. State the Law of Demand. 2. What is the relationship between the law of demand Ceteris Paribus? 3. Why can price not shift a demand curve? 4. What factors can shift a demand curve? 5. Provide an example of a complement. 6. What happens when a demand curve shifts left? Right?