Demand factors
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Transcript of Demand factors
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Factors Affecting Demand
Changes in Demand
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Changes in Demand
• Market demand can change when more consumers enter the market; when incomes, tastes, and expectations change; and when prices of related goods change.
• A graph of a market demand curve can show these changes.
• When demand goes down, people are willing to buy fewer items at all possible prices. In this case, the curve shifts to the left.
• When demand goes up, the curve shifts to the right. People are willing to buy more of the item at any given price.
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Demand and the Consumer
• Demand is related to the number of consumers in the area.
• When more people move into an area, they buy more goods and services from local businesses.
• As a result, the demand curve shifts to the right. • When many people move away, demand for
goods and services in the area decreases. The demand curve shifts to the left.
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Changes in Consumption
• The number of consumers in an area can change due to changes in birthrates, death rates, immigration, or migration.
• Income changes also affect demand. • When the economy is healthy, people receive
raises or move to better-paying jobs. • With more to spend, they are willing to buy more
of a product at any particular price. • In hard times, people lose their jobs. • With less income, they buy less, and demand
goes down.
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Curve Shifting
• Consumers’ tastes change. When a product is popular, the demand curve shifts to the right.
• When its popularity fades, demand decreases, and the curve shifts to the left.
• Expectations affect demand. • If people believe hard times are on the way, they
will buy less. • If people expect shortages of something,
demand increases.
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Substitution
• Competing products are called substitutes because consumers can use one in place of the other.
• A change in the price of one good causes the demand for its substitute to move in the same direction.
• Complements are products that are used together.
• The demand for one moves in the opposite direction as the price of the other.
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Elasticity of Demand• When price rises, we know that quantity
demanded will go down, but we don’t know by how much.
• Demand elasticity is the extent to which a change in price causes a change in the quantity demanded for a product.
• For some goods and services, demand is elastic. • Each change in price causes a relatively larger
percentage change in quantity demanded. • That is, when the price of a product changes a
little, the quantity demanded changes a lot.
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Inelastic Demand
• Demand for a good or service tends to be elastic if it has an attractive substitute.
• Demand also tends to be elastic when the purchase can be postponed.
• For other goods and services, demand is inelastic.
• Price changes have little effect on the quantity demanded.
• Demand for goods with few or no substitutes tends to be inelastic.