Unit 2 Microeconomics: Supply and Demand Chapter 4.2 Economics Mr. Biggs

Shifts in the Demand Curve Changes in Demand Assuming that nothing besides the price of a good or service changes, demand is called ceteris paribus. Ceteris paribus - A Latin phrase that means “all things held constant.” A shift of the entire curve left or right is caused by factors other than just price.

What Causes Shift? Income Several factors can lead to a change in demand rather than simply a change in the quantity demanded. Income An increase in income will shift entire curve to the right. A decrease in income will shift the entire curve to the left. Normal Goods - Goods that consumers demand more of when their income increases. Most goods are normal goods (shift right). Inferior Goods - Goods that are demanded less when income increases. For example, buying expensive shoes instead of a cheap shoes (shift left).

Consumer Expectation Population Our expectations about the future can affect our demand for certain goods today. For example, if you expect the price to rise, you will buy more now. If you expect the price to fall, you will wait. Population An increase or decrease in total population or specific populations can cause a demand curve to shift. For example, as baby boomers start retire, this will increase demand for medical care, retirement homes, and RVs. This will shift the demand curve to the right.

Consumer Tastes and Advertising Trends come and go. Advertising, social trends, movies, or TV shows can all influence demand and shift the demand curve. Prices of Related Goods Complements - Two goods that are bought and used together. For example, if the price of ski boots goes up, the demand for them will decease and the demand for skis will also decrease. Substitutes - Goods used in place of one another. If the price of skis increases, then consumers will demand more snowboards.

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