A Shift A Shift In The In The

Demand Demand CurveCurve

Focus ActivityFocus ActivityHow do you think you would show (using the Demand Curve)How do you think you would show (using the Demand Curve)

anan increaseincrease in the Demand for a good? in the Demand for a good?

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Ceteris ParibusCeteris Paribus

Ceteris paribusCeteris paribus is a Latin phrase is a Latin phrase economists use meaning “all other economists use meaning “all other things held constant.”things held constant.” A demand curve is accurate only as long A demand curve is accurate only as long

as the ceteris paribus assumption is as the ceteris paribus assumption is true.true.

When the ceteris paribus assumption is When the ceteris paribus assumption is dropped, movement no longer occurs dropped, movement no longer occurs along the demand curve. Rather, the along the demand curve. Rather, the entire demand curve shifts. entire demand curve shifts.

The Demand CurveThe Demand Curve

Movement along the DemandCurve means that the Price haschanged

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The Demand CurveThe Demand Curve

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If it shifts to the Right what has happened?

Demand has Increased

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The Demand CurveThe Demand Curve

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What does a shift to the left mean?

Demand has Decreased… “LEFT IS LESS!”

Factors that Cause ShiftsFactors that Cause Shifts 1. Income1. Income

Changes in consumers incomes Changes in consumers incomes affect demand. affect demand. A A normal goodnormal good is a good that consumers is a good that consumers

demand more of when their incomes demand more of when their incomes increase. increase.

An An inferior goodinferior good is a good that is a good that consumers demand less of when their consumers demand less of when their income increases.income increases.

Factors that Cause ShiftsFactors that Cause Shifts

2. Consumer Expectations2. Consumer Expectations Whether or not we expect a good to Whether or not we expect a good to

increase or decrease in price in the increase or decrease in price in the future greatly affects our demand future greatly affects our demand for that good today.for that good today. Example: Anticipation of SalesExample: Anticipation of Sales

Factors that Cause ShiftsFactors that Cause Shifts

3. Population3. Population Changes in the size of the Changes in the size of the

population also affects the demand population also affects the demand for most products.for most products.

Factors that Cause ShiftsFactors that Cause Shifts

4. Consumer Tastes and 4. Consumer Tastes and AdvertisingAdvertising Advertising plays an important role Advertising plays an important role

in many trends and therefore in many trends and therefore influences demand.influences demand.

Prices of Related GoodsPrices of Related Goods5. Prices of Related Goods

• The demand curve for one good can be affected by a change in the price for another good.

ComplementsComplements are two are two goods that are bought goods that are bought and used together. and used together. Example: skis and ski Example: skis and ski boots boots

SubstitutesSubstitutes are goods are goods used in place of one used in place of one another. Example: skis another. Example: skis and snowboards and snowboards