Ceteris Paribus Conditions of Demand (Lesson 2)

Ceteris Paribus Conditions of Demand

The following things must all be held constant when changing the price of a good in a demand curve. If one of the things in this list changes, you must redraw the demand curve as a response.

Demand Changes from changes in consumer tastes or the quality of the good

• At any given price, if the consumers change to prefer it more or the quality improves, then the demand will expand. • At any given price, if the consumers change to prefer it less or the quality falls, then the demand will contract.

Demand Changes from changes in number of consumers

• At any given price, if the size of the population of consumers grows, then the demand will expand. • At any given

Demand Changes from changes in consumer expectations

• If the Future Price of a good is expected to be higher than previously thought, then the demand today will expand. • If the Future Price of a good is expected to be lower than previously thought, then the demand today will contract.

Variables of Ceteris Paribus Conditions

• Income • Prices of related goods • Everything else - Consumer Expectations - Number of Buyers - Tastes/Quality