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Life is Demanding

Learn about the factors that influence demand and how they can cause shifts in the demand curve. Explore examples and practice identifying determinants of demand.

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Life is Demanding

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  1. Life is Demanding

  2. Demand = Consumers Two Factors that need to be considered: 1. Willing 2. Able ($)

  3. LAW OF DEMAND As Price Falls… …Quantity Demanded Rises As Price Rises… …Quantity Demanded Falls Quantity Demanded Price

  4. Graph out the following demand curve for Flaming Hot Cheetos: PriceQuantity Demanded 5.00 100 4.50 150 4.00 200 3.50 250 3.00 300 2.50 350 2.00 400

  5. Know this difference: Change in Quantity Demanded- movements along the demand curve Change in Demand- an entire shift in the demand curve Change in Demand A 4.00 Change in Qty Demanded B 3.00 2.00 D1 D 100 150

  6. Changes in Demand = “Shifters” 1. Substitutes: A competing company makes a similar product that is less expensive causing demand for your item to decrease.

  7. Binxys .55 .50 .45 .40 .35 .30 Prices per Binxy .25 .20 .15 .10 D .05 D1 50 100 150 200 250 350 400 300 Quantity (Millions of Binxys)

  8. Substitutes 8

  9. Substitutes 9

  10. Substitutes 10

  11. Substitutes 11

  12. Substitutes 12

  13. 2.Preferences/ Advertising/ Media Some items become the “trendy” must have item. Millions of dollars are spent letting consumers know about the benefits of their product, therefore the demand may increase. ex. Seasonal item

  14. Binxys .55 .50 .45 .40 .35 .30 Prices per Binxy .25 .20 .15 D 1 .10 D .05 50 100 150 200 250 350 400 300 Quantity (Millions of Binxys)

  15. Summer of the Shark!!!!!

  16. 3. Income level of consumers When a consumer has more or less money, they will demand more or less.

  17. Binxys .55 .50 .45 .40 .35 .30 Prices per Binxy .25 .20 .15 .10 D .05 D1 50 100 150 200 250 350 400 300 Quantity (Millions of Binxys)

  18. The incomes of consumer change the demand, but how depends on the type of good. • Normal Goods • As income increases, demand increases • As income falls, demand falls Ex. Luxury cars, Sea Food, jewelry, homes • Inferior Goods As income increases, demand falls As income falls, demand increases Ex. Generic good, top ramen, spam

  19. Each week you go to your favorite burger place. The price of a burger has increased, but the price of a chicken sandwich stays the same. Over the course of the week you generally buy both burgers and chicken sandwiches. 1. How will the increase in the price of burgers affect your purchase of burgers? -you will buy fewer burgers because they are now relatively more expensive than chicken sandwiches 2. Describe how the substitution effect changes your purchases. -because the price of burgers increased, chicken is now less expensive. Therefore, you substitute chicken for burgers and buy more chicken and fewer burgers

  20. 4. Complimentary Goods:Two goods bought and used together. Price of one affects the other. Bindings Snowboard Can you think of others?

  21. 5. Expectations:If you expect a higher price next week you will buy the item today. If you think the item will go on sale you will wait until the sale to make your purchase.

  22. Shifts in Demand(SPICE = Shifters of the demand curve Right or Left) • Substitutes • Preferences and Advertising • Income Level • Compliments • Expectations

  23. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease

  24. Practice First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? Hamburgers (a normal good) • American incomes fall due to recession • Price for Carne Asada burritos falls to $1 • New health craze- “No ground beef” hits Hollywood • Hamburger restaurants announce that they will significantly increase prices NEXT month • Price of fries and shakes drops 50% • Advertising campaign starring Brad Pitt • Tax cuts give Americans more money • Child dies from tainted beef….News at 11:00 24

  25. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 25

  26. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 26

  27. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 27

  28. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 28

  29. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 29

  30. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 30

  31. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 31

  32. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 32

  33. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 33

  34. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 34

  35. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 35

  36. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 36

  37. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 37

  38. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 38

  39. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 39

  40. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 40

  41. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 41

  42. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 42

  43. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 43

  44. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 44

  45. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 45

  46. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 46

  47. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 47

  48. Practice Hamburgers (a normal good) American incomes fall due to recession Price for Carne Asada burritos falls to $1 New health craze- “No ground beef” hits Hollywood Hamburger restaurants announce that they will significantly increase prices NEXT month Price of fries and shakes drops 50% Advertising campaign starring Brad Pitt Tax cuts give Americans more money Child dies from tainted beef….News at 11:00 First identify the determinant (Shifter). Then decide if demand will increase or decrease. Next, which direction will demand curve shift? 48

  49. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 49

  50. Practice First, identify the determinant (shifter) then decide if demand will increase or decrease 50

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