Factors Affecting Demand: Chapter 4 Section 2

Change in quantity demanded shows change in the amount of a product purchased when there is a change in price.

Income effect- as prices drop, consumers are left with extra real income.

Substitution effect- price can cause consumers to substitute one product with another similar cheaper item.

Change in demand- people buy different amounts of the product at the same prices.

Cause of a change in demand: 1. Change in income 2. Change in tastes 3. A price change in a related product substitute – product used in place of another product or complement- use of one increases the use of another

Substitutes

4. Consumer expectations 5. Number of buyers.