1. Review with your Partners
Name the five determinants of Demand.
What is a substitute good?
What is a complimentary good?
Why do we calculate slope?
What is the relationship between price and quantity demand?
If your slope answer is 5/-25, what does it mean?
What way does the demand curve shift if there is a decrease in demand?
Name 10 college mascots.

2. Chapter 4
Changes in Demand

3. Demand Shifts
Determinants of Demand – factors that shift our demand curve – to the right or to the left
Shift to the right = increase in demand by the consumers
Shift to the left = decrease in demand by the consumers
5 determinants of demand

4. Determinants of Demand
Consumer tastes and preferences
Market size
Income
Prices of related goods
Consumer expectations

5. Substitute Goods
Goods that can be used to replace the purchase of similar goods when prices rise

6. Complementary Goods Goods that are commonly used with other goods.
Example – peanut butter and jelly

7. Elasticity of Demand
Chapter 4

8. Elasticity of Demand
The degree to which changes in a goods price affect the quantity demanded by consumers.
The demand for a product can be either inelastic or elastic.

9. Elastic Demand
Exists when a small change in a goods price causes a major, opposite change in the quantity demanded.
Not necessary
Available substitute goods
expensive

10. Inelastic Demand
Exists when a change in a goods price has little impact on the quantity demanded.
Necessary good
Few substitute goods available
inexpensive

11. Measuring Elasticity % change in QD %change in P
Calculate % change by taking the difference of the two numbers and divide it by the original starting number!
Example – if QD changes from 12million to 14million
and Price changes from 5 dollars to 3 dollars.
2/12 = .167 = .4175 2/

12. What does your answer mean?
x>1 = elastic
x<1= inelastic
x=1= unit elastic