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Shifts in Demand

Shifts in Demand. Mr. Schoonover 9/29/2009. Brief Review…. What does the demand curve tell us? What causes demand to change along the demand curve? What about other factors? What if pizza is proven to make someone live longer? What if Lil Wayne endorses a new brand of Sun Glasses?

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Shifts in Demand

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  1. Shifts in Demand Mr. Schoonover 9/29/2009

  2. Brief Review… • What does the demand curve tell us? • What causes demand to change along the demand curve? • What about other factors? • What if pizza is proven to make someone live longer? • What if Lil Wayne endorses a new brand of Sun Glasses? • What if the new iPhone is more prone to viruses?

  3. Demand Shifts! A change in price causes a change in Quantity Demanded. This is shown as movement along the line. A change in a factor other then price causes a change in demand. This causes the entire curve to SHIFT! This means that consumers demand more at EVERY price

  4. What it looks like – Increase in Demand $5 $4 Price $3 $2 $1 1 2 3 4 5 Quantity

  5. What it looks like – Decrease in Demand $5 $4 Price $3 $2 $1 1 2 3 4 5 Quantity

  6. What Causes Shifts? • Five things that Cause the Curve to Shift • Income – The more money you earn, the more you will spend and vice versa. • Inferior Goods – Things you buy less of when you have more money – TP, Off Brand things, used Cars • EXAMPLE: You get a pay raise. In turn you increase the amount of steak you purchase.

  7. Consumer Expectations • Consumer Expectations – If you expect the price of something to rise, demand rises. If you expect it to drop your demand drops. • EXAMPLE: Golf rates rise in the Summer, so in the spring your demand rises. Prices drop in the Fall so in the summer your demand lowers.

  8. Population • Population – A rise in population will increase the demand for goods. • EXAMPLE: When the baby boomer generation got to college, the demand for dorm rooms did what?

  9. Image and Advertising • Image and Advertising – current trends and more advertising causes the curve to shift. • Example: Low-carb diets become very popular, what will happen to the demand for bagels? • An increase in advertising by Macintosh (those hilarious commercials) causes the demand for Mac’s to increase.

  10. Prices of Related Goods • Prices of related goods – The demand for one good can be affected by a change in demand for another good. • Compliments – Two goods that are used together. • If the price of Blue Ray Discs drops, the demand for Blue Ray Players increases. • Substitutes – goods that are used in place of each other • A rise in cost of Xbox 360 may cause more people to purchase a Nintendo Wii.

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