Date post: | 13-Jan-2016 |
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Ch. 4.2 Notes: Factors Affecting Demand
I. 2 Graphs explaining why we buy more…..
A. Change in Quantity Demand = price down
we buy more
1. Why?
a. Income Effect = it’s cheaper and
you can afford it now
b. Substitution Effect = as price goes
down, people will buy that product
over other products
$4.99 $4.99
$2.99
X
B. Change in Demand = price same but we buy more 1. Why? a. consumer tastes changes = advertising b. Our income goes up…… i. Normal Goods = Income up,buy more ii. Inferior Goods = Income down, buy more
c. prices of other products change ……
i. Substitutes = items that replace each other * Ex.
Ex. If the price of boxers increase, what
happens to the demand of briefs?
ii. Complements = items that are used
together
Ex. If the price of golf clubs increase to $500 each, what happens to the demand of golf balls?
d. Change in expectations = when we foresee something in the future and we buy more now * Ex.
Sales of Guns Soar in U.S. as Nation Weighs Tougher Limits
• http://www.mediaza.com/MIDir/portalinfo/PIMedia.asp?codigo=130993&panel=-1&subpanel=140 = magazine ad rates