Lecture 3 - Demand Shifting
demand shifters
1.Prices of Related Goods (classified as substitutes and complements) 2.Income 3.Number of Buyers 4.Consumer Tastes •If it increases the demand of that product, then demand shifts right •If it decreases the demand of that product, then demand shifts left
not shifting
Contrast this to a movement along the curve, like going from A to B, caused by a price change.
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Since Price and Quantity are the Y and X axis, how the quantity reacts to a change in price is something that is already expressed by the demand curve. •A shift of the entire demand curve, then, cannot just be caused by a change in the price of that product. It has to be something aside from price that affects quantity.
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Let's say the price of rye increases .What do you expect to happen to the demand for wheat? (Hint: wheat and rye can both be used to make things like pasta or bread. Assume here that they are never combined together to make these things.) First, wheat and rye are: Price of rye going up causes wheat to be purchased at each price level. Therefore, the Demand Curve shifts to the
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Suppose there is an increase in the price of yeast, an ingredient that many use with wheat to make bread. Step 1: Determine the relationship that yeast has with wheat. Substitute? Complement? Step 2: Do more or less people buy wheat because of this price change of yeast? Step 3: If more, shift that curve right. If less, shift left. Here, demand shifts left. Meaning that the increase in price of yeast causes wheat to be bought at each price level.
related goods
They can either be substitutes or complements .1. Coke and Pepsi = substitutes 2.Flat screen TVs and Blu-ray players = complements 3.Cheesecake and ice cream = substitutes 4. ECN212 classes and other fun activities = substitutes
price of a related good
When the ___ ___ ___ ___ ___ changes, the quantity demanded of the good we are looking at will change at every price level. •i.e. at any price, we'd want more (or less) of the good
demand shifting
When the demand curve shifts right, the quantity demanded is higher at every single price. If demand shifts left, the quantity demanded is lower at every price.
