Presentation on theme: "Demand Shifts. Law of Demand Demand Curves shift when quantity demanded changes –Causes Income –Normal good –Inferior good Consumer expectations."— Presentation transcript:
Law of Demand Demand Curves shift when quantity demanded changes –Causes Income –Normal good –Inferior good Consumer expectations Population Consumer tastes and advertising
Law of Demand Related Goods can also shift –Complements –Substitutes
Elasticity Elasticity of Demand –A measure of how consumers react to a change in price Inelastic- demand is not sensitive to a change in price Elastic- demand is very sensitive to a change in price
Elasticity Elasticity = % change in quantity demanded % change in price % change in price Percentage change = original number-new number original number-new number original number X100 original number X100 If elasticity is less than 1- inelastic If elasticity is greater than 1- elastic
Elasticity Factors affecting elasticity –Available of substitutes –Relative importance –Necessities vs. luxeries –Change over time Elasticity and revenue –P. 96
Assignment Use the same product that was used for the demand shift assignment Come up with 5 different prices of your product Poll 20 people about if they would be willing to buy your product at the 5 prices Create a demand schedule and demand curve Calculate the elasticity of your product –How would this elasticity affect the revenue of your product?