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Demand Definitions: Reprise

Demand Definitions: Reprise. In economics, A change in quantity demanded occurs when a change in the price of the good itself causes a consumer to buy more or less.

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Demand Definitions: Reprise

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  1. Demand Definitions: Reprise • In economics, • A change in quantity demanded occurs when a change in the price of the good itself causes a consumer to buy more or less. • A change in demand occurs when a consumer buys more or less of a good because of a change in some other variable that is not the price of the good itself.

  2. Change in Demand • Changes in demand are shown by shifting the demand curve. • Increases in demand shift the demand curve to the right. Price D2 D1 Quantity 0

  3. Change in Demand • Changes in demand are shown by shifting the demand curve. • Decreases in demand shift the demand curve to the left. Price D1 D2 Quantity 0

  4. Change in Demand: Causes • A change in demand may be caused by any of the following: • A change in the price of a related product. • A change in the buyer’s income. • A change in the buyer’s tastes and preferences. • A change in the number of buyers.

  5. A Change in the Price of Related Products: Substitutes • A decrease in the price of Y, a substitute for X, causes the demand for X to fall. • A decrease in the price of butter causes some people to buy less margarine, a substitute for butter. • The demand curve for margarine shifts to the left. • A decrease in the price of steak causes some people to buy less chicken, a substitute for steak. • The demand curve for chicken shifts to the left.

  6. A Change in the Price of Related Products: Substitutes • An increase in the price of Y, a substitute for X, causes the demand for X to rise. • An increase in the price of butter causes some people to buy more margarine. • The demand curve for margarine shifts to the right. • An increase in the price of steak causes some people to buy more chicken. • The demand curve for chicken shifts to the right.

  7. A Change in the Price of Related Products: Complements • A decrease in the price of Y, a complement for X, causes the demand for X to rise. • A decrease in the price of gasoline causes some people to travel more in their cars. • Demand for travel shifts to the right. • A decrease in the price of steak causes some people to buy more steak sauce. • Demand for steak sauce shifts to the right.

  8. A Change in the Price of Related Products: Complements • An increase in the price of Y, a complement for X, causes the demand for X to fall. • An increase in the price of gasoline causes some people to travel less in their cars. • Demand for travel shifts to the left. • An increase in the price of steak causes some people to buy less steak sauce. • Demand for steak sauce shifts to the left.

  9. A Change in Income • An increase in income permits a person to spend more, causing demand for some goods to increase. • Demand shifts to the right as income rises. • A decrease in income limits a person’s ability to spend, causing demand for some goods to decrease • Demand shifts to the left as income falls.

  10. A Change in Tastes and Preferences • Changes in tastes and preferences can cause people to prefer more or less of any good. • Tastes and preferences are influenced by advertising, new information, growing older, changing seasons, fads, etc. • Favorable changes in tastes and preferences shift demand to the right. • Unfavorable changes in tastes and preferences shift demand to the left.

  11. A Change in the Number of Buyers • As the population increases, demand for many goods increases. • Demand shifts to the right. • As the population decreases, demand for many goods decreases • Demand shifts to the left.

  12. Supply Definitions: Reprise • In economics, • A change in quantity supplied occurs when a change in the price of the good itself causes a seller to be willing to sell more or less of the good. • A change in supply occurs when a seller is willing to sell more or less of a good because of a change in some other variable that is not the price of the good itself.

  13. Change in Supply • Changes in supply are shown by shifting the supply curve. • Increases in supply shift the supply curve to the right. Price S1 S2 Quantity 0

  14. Change in Supply • Changes in supply are shown by shifting the supply curve. • Decreases in supply shift the supply curve to the left. Price S2 S1 Quantity 0

  15. A Change in Supply: Causes • A change in supply may be caused by any of the following: • A change in the size of the industry • Technological progress • Changes in the price of inputs • Changes in the prices of related outputs

  16. A Change in the Size of the Industry • An increase in the number of suppliers in an industry increases supply. • The supply curve shifts to the right. • A decrease in the number of suppliers in an industry decreases supply. • The supply curve shifts to the left.

  17. Technological Progress • Technological progress that permits a supplier to produce more, other things remaining the same, increases supply. • Technological progress increases productivity which decreases costs so more can be supplied at any given price. • The supply curve shifts to the right.

  18. A Change in the Price of Inputs • A change in the price of inputs changes the cost of production. • If input prices increase, production costs increase, and other things remaining the same, a supplier will supply less at any given price. • The supply curve shifts to the left.

  19. A Change in the Price of Inputs • A change in the price of inputs changes the cost of production. • If input prices decrease, production costs decrease, and other things remaining the same, a supplier will supply more at any given price. • The supply curve shifts to the right.

  20. A Change in the Prices of Related Products • A change in the price of a good produced by a multi-product industry may shift the supply curves of all the other goods produced by that industry. • If the price of a product, good Y, increases, firms have an incentive to shift resources to the production of Y and away from the production of another good such as good X. • The supply curve for X shifts to the left.

  21. A Change in the Prices of Related Products • A change in the price of a good produced by a multi-product industry may shift the supply curves of all the other goods produced by that industry. • If the price of a product, good Y, decreases, firms have an incentive to shift resources to the production of X and away from the production of Y. • The supply curve for X shifts to the right.

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