Quick Review: What causes a change in quantity demand? Does a change in quantity demand cause you to move along the same demand curve OR shift to a new demand curve? So…is a change in quantity demand a MOVER or a SHIFTER?

The Demand Curve: Movers vs. Shifters

- Must draw a new demand curve  This means the curve will shift to the left or to the right. - We call these “shifters” -Curve will shift left (in) when demand decreases -Curve will shift right (out) when demand increases

Quantity Price A B C D E F Change in Demand Increase B C D E F A

Quantity Price A B C D E F Change in Demand B C D E F A

6 Factors for Change in Demand

1. Income  People’s to buy certain goods is affected by their income.  People’s ability to buy certain goods is affected by their income. Less money means demand will decrease & the curve will shift left, more money will increase demand & the curve shifts to the right. Changes in consumer confidence effect the economy:

2. Consumer Tastes: - popularity of an item affects demand (includes personal style, quality, etc.) -Advertising influences people’s tastes

3. Substitutes  Substitutes are goods/services that can be used of another good or service. (Competitors)  Substitutes are goods/services that can be used in place of another good or service. (Competitors) As the price of a substitute increases, the demand for the other good increases. Examples: -Pepsi or Coca Cola -Ordering Pizza or Chinese for dinner -Using butter or margarine

Substitute’s price goes up Ex: Coke price increases: Substitute’s price goes down Ex: Coke price decreases: Pepsi

4. Complements  Complements are goods that are used together, so that a rise in demand in one good will increase the demand for the other good. If a price change occurs for the complement, it will affect the demand for the original item. Examples: -Milk and cereal - DVD Player and DVD’s

Complement’s price goes up Ex: Milk price increases Complement’s price goes down Ex: Milk price goes down Cereal

5.Consumer Expectations  If you expect a product to go on sale, you wait to buy that product  If you expect a product’s price to rise, you will buy the product now. rise, you will buy the product now.  Examples  Cars  Gas  Tickle-Me-Elmo  Smart Phones

Consumers expect price to rise Consumers expect price to fall IPhone

6. Market Size  The size of the market is based on the number of consumers.  Example  People leaving Buffalo has caused a smaller market size.  More people moving to Florida and Texas has created larger market sizes in these states. If people leave a region, the market size will decrease meaning the curve will shift to the left and vice versa.

Bigger PopulationSmaller Population