1. 3-2 Changes in Demand

2. What does it mean for a product’s demand to shift? What factors can shift demand for a product? How do substitute goods differ from complementary goods?

3. determinants of demand substitution goods complementary goods

4. When a product’s demand shifts, different quantities of a product are demanded at each and every price. Determinants of demand – factors other than price that cause an increase or decrease in the quantity demanded at each price Causes the graph to shift to the left (decrease) or to the right (increase)

5. (Non-price) Determinants of demand – Factors other than price causes an increase or decrease in quantity demanded at any given price – creates a new demand curve 1.Consumer tastes and preferences 2.Market size 3.Income 4.Prices of related goods 5.Consumer expectations

7. Consumer tastes and preferences Based on popularity and trends May be influenced by advertising Baby carrots; Silly Bandz Baby carrotsSilly Bandz Market size Based on the number of people in a geographic area Can also reflect the number of people in a demographic – example: knee/hip replacements

8. Income More money = higher demand – get a job or a raise Less money = lower demand – lose a job Consumer expectations Behavior changes based on what people believe will happen Example – stop and get gas if you think prices will go up even if you wouldn’t normally have stopped

9. Price of related goods Demand is connected to the demand of another product Substitute goods Goods that can be used in place of another product when the price rises – price of butter goes up so you buy margarine instead – demand for margarine changes though the price of margarine hasn’t changed

10. Price of related goods Demand is connected to the demand of another product Complementary goods Goods that are used along with another good You buy more of the complementary good even though the price hasn’t changed when the price of another good drops Example – if the price of paint drops, you buy more paint brushes even though the price hasn’t changed– paint brushes are a complementary good to paint

11. ProductSubstitute GoodComplementary Good buttermargarinebread