Change in D vs. Change in Qd

1
Change in D vs. Change in Qd

• Change in Quantity Demanded - a change in the
  desire or means to purchase the good, thus there
  is a change in quantity demanded at EVERY price.
  (Price Effect)
• Change in Demand - a shift of the demand curve

2
Change in D vs. Change in Qd

• Changes in Demand
• Increase in demand - demand curve shifts to the
  right
• Decrease in demand - demand curve shifts to the
  left

3
Change in Demand

• Factors Which Cause a Change in Demand
• Consumer Income
• Price of Related Goods
• Number Composition of Buyers
• Consumer Expectations about Future Prices
• Consumer Tastes and Preferences

4
Change in Demand - Income

• If you graduate from college and start making a
  substantial income - What might happen to the
  amount of CDs you would want to buy?
• It would increase! You would be willing and able
  to purchase more CDs at every price.
• Thus, demand has increased.

5
Change in Demand - Income

• If after a year at your new job the boss cuts
  salaries by 30. What happens to Demand?
• It would decrease.
• You are now have less means to purchase CDs at
  all prices.

6
Normal and Inferior Goods

• Given the information we have, CDs are a normal
  good
• Normal Good - any good which increases in demand
  as income increases (and vice-versa)
• Most goods are normal
• Inferior Good - any good which decreases in
  demand as income increases (and vice-versa)
• Ex. - Macaroni and Cheese

7
Change in Demand - Price of Related Goods

• Substitute - a good which can be consumed in
  place of another good
• What would happen to the demand for pizza if the
  price of hamburgers fell?
• The demand for pizza would probably fall since
  people would be buying hamburgers instead.

8
Change in Demand - Price of Related Goods

• Complement - a good which is consumed along with
  the consumption of another good
• Ex - Peanut Butter and Jelly are complements.
• If price of peanut butter increases, consumers
  purchase less peanut butter
• Result ? Consumers purchase less jelly
• Since people buy less peanut butter they need
  less jelly for PBJ sandwiches

9
Change in Demand - Price of Related Goods

• Thus, either of the following will increase
  Demand
• Price of a substitute good increases
• Price of a complement good decreases
• And either of the following will decrease Demand
• Price of a substitute good decreases
• Price of a complement good increases

10
Change in Demand Number of Buyers

• The more buyers in the market for a good, the
  greater the TOTAL quantity demanded (by the whole
  economy) of the good at a given price.
• Since the quantity demanded is higher at EVERY
  given price, the demand has increased.
• Likewise, if there are less buyers in the market
  there is less quantity demanded at every price,
  so demand has decreased.

11
Change in Demand - Expectations about Future
Prices

• If we were to hear a new story about how CD
  prices were going to go up next month, would you
  buy that CD you have had your eye on now or
  later?
• Now. If you know prices will rise, you will want
  to buy more now, so you can avoid paying the
  higher price in the future.
• So demand will increase in response to this
  information

12
Change in Demand - Expectations about Future
Prices

• Likewise, if we hear that CD prices are going to
  drop next month, what do we do now?
• It is likely that we will buy less now, waiting
  to buy that new CD until the prices fall next
  month, thus demand will decrease.

13
Change in Demand - Tastes and Preferences

• Lets say we find out listening to CDs can
  improve your hearing, or what if suddenly CDs
  become very fashionable to buy? If consumers
  prefer more of a good, the demand for the good
  increases (a rightward shift of the demand
  curve).
• What if we find out CDs emit dangerous radiation?
  If consumers prefer a good less, the demand for
  the good decreases (a leftward shift of the
  demand curve).