Demand Chapter 4 Demand Lesson 2: Factors Affecting Demand A. - PowerPoint PPT Presentation

Lesson 2: Factors Affecting Demand Chapter 4 Demand

Lesson 2: Factors Affecting Demand A. Main Idea: Price changes quantity demanded both because it affects how wealthy consumers perceive themselves to be and because it affects the price of a good or service in relation to other similar products.

Lesson 2: Factors Affecting Demand • Define a change in quantity demanded. • A movement along the demand curve showing that a different quantity is purchased in response to a change in the price of a product • What causes it? • only a change in price can cause a change in quantity demanded

Lesson 2: Factors Affecting Demand • How is the substitution effect different from the income effect? • income effect only deals with changes in demand due to the change of one price • substitution effect is the change in quantity demanded for a product because its price has shifted in relation to other prices.

Lesson 2: Factors Affecting Demand • How does substitution effect and income effect affect the demand curve? • Causes a shift along the curve, but does not change the curve itself

Lesson 2: Factors Affecting Demand B. Main Idea: Factors other than price can change demand.

Lesson 2: Factors Affecting Demand • What causes the demand curve to shift to the right? • An increase in demand shifts the curve to the right. • What causes the demand curve to shift to the left? • A decrease in demand shifts it to the left

Lesson 2: Factors Affecting Demand • Describe the relationship in demand between a product and its substitutes. • Price of a product increases, demand for its substitute generally increases. • Price of a product decreases, demand for its substitute generally decreases.

Lesson 2: Factors Affecting Demand • Describe the relationship in demand between a product and its complement(s). • Price of a product increases, demand for its complement(s) generally decreases. • Price of a product decreases, demand for its complement(s) increases. • product use increases the use of its complement(s)

• Can expectations change the demand for products? Why or why not? • Yes • Expecting product breakthroughs can result in fewer purchases now, shifting the curve to the left. • Expecting product shortages can result in people stocking up now, shifting the curve to the Lesson 2: Factors Affecting right. Demand

Lesson 2: Factors Affecting Demand • Why would the number of consumers in a market shift the demand curve left or right? • More consumers usually means more market demand, so the curve shifts right. • Fewer consumers means less market demand, so the curve shifts to the left.