Demand Shifters

1. Demand Shifters

2. Let's Take A Look At The Five Demand Shifters [Tribe]

3. Warning Concentration on these slides is guaranted to improve your economics grade.

4. 1."Change in Taste" [Direct] D2 D1 P QD1 QD2

5. 2. Related Goods prices' [Substitutes-Direct; Complements-Inverse] D1 D2 D D1 P1 D2 P P P2 QD2 Complement [Inverse] QD1 Substitute [Direct] Cereal Pop Tarts Milk

6. 3. Change in Income [Normal-Direct; Inferior-Inverse] Used Cars New Cars D2 D1 Less income results in more demand for used cars; less demand for new cars. More income results in more demand for new cars; less demand for used cars. P QD1 QD2

7. 4. Change in Market Size [Direct] [Number of Consumers] This is what we told 1 billion Chinese, as potential consumers, when we opened trade relations with them in the 70s. D2 D1 New Cars P More demand for both new and used cars Used Cars QD1 QD2

8. 5. Expectations [of consumers] [about future price, availibility, & income] If Steve Jobs responds to iRate customers who bought the iPhone at $599 and says, “iSorry, we will raise the price back to $599 in 3 weeks.” $399 D2 D1 Buy it now to save money. iPhone P QD1 QD2

9. 5. Expectations [of consumers] [about future availibility of toilet tissue] If there is expected to be a major shortage of toilet tissue, then consumers will stock up now or risk not getting any. D2 D1 P QD1 QD2

10. 5. Expectations [of consumers] [about future income] Let’s say that we are coming out of recession & consumers feel secure about their jobs. [Positive future income] D2 D1 P QD1 QD2

11. 5. Expectations [of consumers] [about future income] Let’s say that we are going into a recession and consumers don’t feel secure about their jobs. [Negative future income] D1 D2 P QD2 QD1

12. The End