Chapter 4: What is Demand? (Lesson 2)
What changes the Quantity demanded?
A change in the quantity demanded can only be caused by a change in price. Other things affect the demand curve, but price is the only factor that can cause movement along the demand curve.
What factors, excluding price, effect demand?
Consumer income, consumer tastes, substitutes/complements, future expectations, and # number of consumers in market.
What is an example of consumer income effect?
Consumer spent $120 to buy 24 burritos when price was $5 per burrito. If the price decreases to $3 they would spend $72for the same amount of burritos leaving with $18 in their account for that pay period.
What does substitution and income effects tell you?
Explains why consumers buy more burritos when the price drops from $5 to $3.
What is an example of substitution effect?
If a burrito becomes less expensive than a slice of pizza then people will be more likely to buy the burrito.
What is an example of a substitute effect?
If the price of the primary product does change and you decide to buy the substitute. Ex: Cost of Coffee increases by $5 and tea is $5 less, so you decide to buy the Tea.
What is an example of a substitute?
If the price of the primary product doesn't change but you decide to buy the substitute. Ex: Cost of Coffee doesn't change, but you buy Tea because that's what you want.
What does the number of consumers effect?
Market demand curve can change if there is a change in the # of consumers.
What are Expectations?
People expectations effecting demand.
What is an example of substitutes?
People substitute margarine for butter when $ for butter is high increasing the demand for margarine shifting the curve to the right.
What does consumer tastes mean?
People will buy less of a product if they get tired of it , or if they have a reason to worry about whether it's a good choice. When fewer people want a product at all possible prices, the demand curve shifts to the left, showing a decrease in demand.
What are complements?
Related goods for example computers and software.
What are substitutes?
Some products are known as substitutes because they can be used in place of other products.
What happens to the demand curve when factors other than price come into play?
The entire demand curve shifts (moves to the left or right). Factors other than price may be an advertising campaign or a change in consumer income. The demand curve movement(trends) are an important principle in economics
What is the effect of the change in price on quantity demanded?
The quantity demanded changes.
What is an example of how expectations affects demand?
Weather service predicting a bad year for crops so people buy more food increasing the demand and shifting the demand curve to the right.
What is a change in demand?
When other factors change while the price remains the same - when this happens people may decide to buy different amounts of a product at the same price = change in demand. As a result the entire demand curve shifts to the right to show an increase in demand.
What is consumer income?
When people earn more, they are willing to buy different amounts at all possible prices.
What is the income effect?
When price of product drops consumers pay less resulting in consumer having extra income to spend. If a products price increases consumers tend to buy less. The income effect is the change in quantity demanded because of a change in price that alters consumers income.
What does it mean for there to be a change in the quantity demanded?
When the price of a product changes and all the other factors remain the same - the demand curve doesn't move, but the quantity demanded changes.
What is the substitution effect?
When there is a change in quantity demanded because of a shift in relative prices.
What is an example of how # of consumers effects demand curve?
Workers move into a neighborhood and many buy burritos for lunch - adding to the # of burritos the stand can sell. When workers move the demand decrease and the curve shifts to the left.
