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Factors Which Change Demand

Learn about the various factors that can influence changes in demand for products, such as consumer income, tastes, expectations, substitutes, and complements. Understand how these factors impact pricing and consumer behavior.

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Factors Which Change Demand

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  1. Factors Which Change Demand

  2. Change inDemand: When people are wiling to buy different amounts of the product at the same prices The demand line shifts to the right (increase) or left (decrease) Change inDemand

  3. Hershey Kiss Power! GOOD NEWS! Scientists have just discovered that Hershey Kisses have a special chemical inside of them that helps you be smarter and stronger each time you eat one! How many Hershey Kisses will you now buy if they are priced at: • $1.00 each • $0.50 each • $0.10 each

  4. Factors That Change Demand • Consumer Income • Increase in income = higher demand (shift to the right) • Decrease in income = lower demand (shift to the left) • Example: 2008-2009 recession • Number of Consumers • More consumers = higher demand • Fewer consumers = lower demand • Baby boomers & hearing aides

  5. Factors That Change Demand • Consumer Tastes • More people like it = increase in demand • Less people like it = decrease in demand • Bell bottom jeans in the 70’s and 80’s • Expectations • If prices of a good are expected to go up in the future, demand will go up in the present • If prices of a good are expected to go down in the future, demand will go down in the present • Oil & hurricanes

  6. Factors That Change Demand • Substitutes • Goods that can replace other goods • Ex. Pepsi v. Kroger brand soda • Increase in the price of a substitute = increase in the demand for other goods • Decrease in the price of a substitute = decrease in the demand for other goods • Complements • Goods that go along with other goods • Increase in the price of complements = decrease in demand for other goods • Decrease in the price of complements= increase in demand for other goods • Ex. Hot dogs and hot dog buns

  7. Important Differences… Change in quantity demanded • Affected ONLY by price changes for the good/service being discussed • The line does not move; the point on the line does Change indemand • Affected by many factors • The demand line moves (shifts)

  8. Practice • Changes in consumer tastes • A new “baggy jeans” fad has begun to spread throughout the country. What will happen to the demand for baggy jeans? • Substitutes • Pizza Hut has just dropped the price for their pizzas. What will happen to demand for Papa John’s? • Complements • The cost for a song on iTunes has just been raised to $5.00/song. What will happen to the demand for MP3 players?

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