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Increase in demand graph Decrease in demand graph
What factors affect demand?What factors affect demand?
Action buttons allow easy access to commonly used slides from any point
in presentation.
Increase in demand graph Decrease in demand graph
Price
Determinants of Demand
Income
Number of Buyers Prices of other
goods
Tastes
Expectationsabout future
Quality
Supply?
Increase in demand graph Decrease in demand graph
PriceDeterminants of Demand
Income
Number of Buyers
Prices of othergoods
Tastes
Expectationsabout future
Quality
Supply?
Increase in demand graph Decrease in demand graph
Slide Show PresentationSlide Show Presentation
• Information presented in linear fashion.• Professor determines content, depth, and
order of presentation.• Allows for little flexibility.• Students make few choices about direction
of lecture.• Difficult to switch back and forth between
topics.
Increase in demand graph Decrease in demand graph
Using Action SettingsUsing Action Settings
• Any object can be used to link to another page in the PowerPoint presentation or an external web page.
• Assign “Action Settings” in Slide Show menu.
Increase in demand graph Decrease in demand graph
Using Action SettingsUsing Action Settings
• By assigning an actions to objects in a presentation, a PowerPoint presentation is transformed from a Slide Show into an interaction web page.
• Any object can be used to link to another page in the PowerPoint presentation or an external web page.
• Assign “Action Settings” in Slide Show menu.
Increase in demand graph Decrease in demand graph
Using Action SettingsUsing Action Settings
• By assigning an actions to objects in a presentation, a PowerPoint presentation is transformed from a Slide Show into an interactive web page.
• Any object can be used to link to another page in the PowerPoint presentation or an external web page.
• Assign “Action Settings” in Slide Show menu.
Increase in demand graph Decrease in demand graph
Hyperlink PresentationHyperlink Presentation
• Information presented in non-linear fashion.• Professor determines content. Students and
professor determine depth and order.• Allows for more flexibility.• Students make choices about direction of
lecture.• Easy to switch back and forth between
topics or commonly used slides.
Increase in demand graph Decrease in demand graph
PricePrice
• Price is the most important determinant of demand.
• A “demand curve” plots combinations of prices and quantity demanded.
• A shift in price causes a shift along the demand curve
Increase in demand graph Decrease in demand graph
Price (continued)Price (continued)
• A change in price causes a shift along the demand curve.
• A shift along the demand curve is referred to as a “shift in the quantity demanded.”
• A shift in any other variable except price causes a shift in the entire demand curve.
• A shift in the entire demand curve is referred to as a “shift in demand.”
Increase in demand graph Decrease in demand graph
IncomeIncome
• Changes in income can increase or decrease demand.
• A good whose demand decreases with an increase in income is called an “inferior good.”
• A good whose demand increases with an increase in income is called a “normal good.”
Increase in demand graph Decrease in demand graph
Examples of changes in incomeExamples of changes in income
• An increase in income will reduce the demand for ramen noodles or generic products.
• An increase in income will increase the demand for cars or clothing.
• An increase in income will significantly increase the demand for air travel or jewelry.
Increase in demand graph Decrease in demand graph
Prices of other goodsPrices of other goods
• Changes in the prices of other goods can increase or decrease demand.
• A good that causes an increase in the demand for another good when its price increases is called a “substitute good.”
• A good that causes a decrease in the demand for another good when its price increases is called a “complementary good.”
Increase in demand graph Decrease in demand graph
Examples of changes in other prices
Examples of changes in other prices
• An increase in the price of peanut butter will reduce the demand for jelly. Peanut butter and jelly are complements.
• An increase in the price of Pepsi will increase the demand for Coke. Pepsi and Coke are substitutes.
Increase in demand graph Decrease in demand graph
Number of buyersNumber of buyers
• An increase in the number of potential buyers will increase the demand for the good.
• For example, the demand for land increases as the population increases.
• Similarly baseball tickets are generally more expensive in larger cities.
Increase in demand graph Decrease in demand graph
Future PricesFuture Prices
• An increase in the expected future price of a good increases current demand.
• A decrease in the expected future price of a good decreases current demand.
• For example, when a good is temporarily put on sale, people stock up on the good.
Increase in demand graph Decrease in demand graph
TastesTastes
• Demand curves can shift due to changes in tastes over time.
• For example, demand for cereal may be high in the morning but low at night.
• Similarly, demand for Saturday Night Fever CDs may be high in the 1970s but low in the 2000s.
Increase in demand graph Decrease in demand graph
QualityQuality
• Demand curves can shift due to changes quality.
• At a given price, demand for Giordano’s pizza is higher than the demand for Papa John’s.
• Similarly, CDs cost more than cassettes because the music is of higher quality.
Increase in demand graph Decrease in demand graph
Supply?Supply?
• Demand curves do not shift due to changes supply.
• Shifts in supply change the equilibrium price causing a shift along the demand curve.
• Shifts in supply cause a change in the quantity demand not a shift in the demand curve.
Increase in demand graph Decrease in demand graph
Graph of a supply shiftGraph of a supply shift
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Price
Old demand New supply Supply
• An decrease in supply shifts the supply curve to the left.
• Equilibrium price increases.
• Quantity demanded decreases.
Increase in demand graph Decrease in demand graph
Increase in demandIncrease in demand
05
10152025303540
0 2000 4000 6000 8000 10000 12000 14000 Quantity
Pric
e
Old demand New demand Supply
• An increase in demand shifts the demand curve to the right.
• Equilibrium price increases.
• Quantity demanded increases.
Increase in demand graph Decrease in demand graph
Decrease in demandDecrease in demand
05
101520
25303540
0 2000 4000 6000 8000 10000 12000 14000 Quantity
Price
Old demand New demand Supply
• A decrease in demand shifts the demand curve to the left.
• Equilibrium price falls.
• Quantity demanded falls.