determinants of demand
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Determinants of Demand. Review: Change in Quantity Demanded. Price. D1. Quantity. On to … Determinants of Demand. DETERMINANTS OF DEMAND. Changes in income Changes in the prices of related goods Substitutes: goods that can replace one another - PowerPoint PPT PresentationTRANSCRIPT
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Determinants of Demand
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Review: Change in Quantity Review: Change in Quantity DemandedDemanded
Quantity
Price
D1
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On to … Determinants of Demand
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DETERMINANTS OF DEMANDChanges in income
Changes in the prices of related goods Substitutes: goods that can replace one
another Compliments: goods that are consumed
together
Changes in the size or composition of the population
Change in price expectations
Changes in tastes/preferences
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Practice Problem #1
What would happen to the demand of pizza if you find out pizza causes heart disease? • Determinant?• Increase or decrease in demand?
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Answer to Practice Problem #1
What would happen to the demand for pizza if you find out that pizza causes heart disease?
• Determinant - A change in consumer tastes/preferences; consumer expectations
• Decrease in demand
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Practice Problem #2
What would happen to the demand of Nike shoes if it is the favorite shoe of many sports celebrities?
• Determinant?• Increase or decrease in demand?
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Answer to Practice Problem #2
What would happen to the demand of Nike shoes if it is the favorite shoe of many sports celebrities?
•Determinant – A change in consumer
tastes/preferences•Increase in demand
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Practice Problem #3
•A new energy drink comes to market that does not have negative side effects (e.g., jitters, crashes).
•Determinant?•Increase or decrease in demand of Red
Bull?
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Answer to Practice Problem #3
•A new energy drink comes to market that does not have negative side effects (e.g., jitters, crashes).
•Determinant – A related good (substitute)•Decrease in demand of Red Bull
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Practice Problem # 4
•Student allowances and the minimum wage for work increases.
•Determinant?•Increase or decrease in demand of video
games?
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Practice Problem # 4
•Student allowances and the minimum wage for work increases.
•Determinant – Income increase•Increase in demand of video games
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Movement Along a Demand Curve Versus a Shift of the Curve
• Remember there is a difference between quantity demanded and demand.
• Markets never stand still, there are always outside factors that change the actual price of the good or how much is demanded altogether.
• A change price creates a change in the quantity demanded, other things constant. ▫ This causes a movement along the demand curve.
• A change in one of the determinants of demand causes a change in demand.▫ This causes in a shift of a demand curve. Or a new
curve.
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What determinants would increase the market demand for pizza?
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Determinants Increasing Demand•Increases in income•Increases in population•Increase in prices of substitute goods•Decrease in price of complement goods•Consumer expectation that prices will
increase in the future•Improvement in taste•Increased consumer preferences
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Determinants of increased demand change the story….. How so?
Quantity demanded of pizza per week (by millions)
Price of pizza
15 $15.00
20 $12.00
25 $9.00
30 $6.00
35 $3.00
--- $0.00
Quantity demanded of pizza per week (by millions)
Price of pizza
9 $15.00
14 $12.00
19 $9.00
25 $6.00
30 $3.00
--- $0.00
Original Story New Story
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8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pri
ce p
er
piz
za
D1
How would determinants of increased demand change the picture of demand?
b
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8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pri
ce p
er
piz
za
D1
Increased Market Demand for Pizza
D2
fb
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What determinants would decrease the market demand for pizza?
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Determinants Decreasing Demand•Decreases in income•Decreases in population•Decrease in prices of substitute goods•Increase in price of complement goods•Consumer expectation that prices will
decrease in the future•Deterioration of taste•Decreased consumer preferences
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Determinants of decreased demand change the story….. How so?
Quantity demanded of pizza per week (by millions)
Price of pizza
5 $15.00
10 $12.00
15 $9.00
20 $6.00
25 $3.00
--- $0.00
Quantity demanded of pizza per week (by millions)
Price of pizza
9 $15.00
14 $12.00
19 $9.00
25 $6.00
30 $3.00
--- $0.00
Original Story New Story
![Page 22: Determinants of Demand](https://reader033.vdocuments.us/reader033/viewer/2022042703/56812a87550346895d8e22dc/html5/thumbnails/22.jpg)
8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pri
ce p
er
piz
za
D1
How would determinants of decreased demand change the picture of demand?
b
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b
D2
Decreased Market Demand for Pizza
8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pri
ce p
er
piz
za
j
D1