Thurs changes to demand

Bellringer

Graph and correctly label this demand

schedule

Price Movie ticketsPer night

$15 1000$12.50 2000$10 4000$7.50 7000

What economic concept is this graphic showing?

MANKIWCHAPTER 4 ALL WEEK

Review of Law of Demand• What happens in the

following situations?• The price of college

tuition increases?• The price of blue ray

DVD players decreases?

• The price of Eegees drinks increases?

• Effect on other goods/services?

2 important effects• Substitution Effect an increase in price of one good causes a

buyer to buy more of the other good, since the first good has become relatively expensive, and vice versa. The buyer substitutes consumption of the second good for consumption of the first.

• “substitutes” – a good which can be substituted for another• “complements” – a good that is purchased with another

• Income Effect – changes to a person’s income changes their quantity demanded

• Normal goods – goods you buy more of when your income increases

• Inferior goods – goods you buy less of when your income increases

Why is this important for firms?

What sorts of goods are these?

Others?Compliments?Normal/Inferior?

Cultural?

• Preferences change

• Spam in Hawaii

• Sauerkraut at Pueblo

Changes to demand

Does Demand change when the price of a good changes?

Only the Quantity demanded changes with price

Review:

What is the Q*D at Price = $1.50?

Show +/- framework

Quantity

$

Graphically speaking… Demand of movie tickets

D*

A RAISE!!!!

A Child!!!!

D after raise

Determinants of Demand• Changes to tastes and preferences

Determinants of Demand

• Changes to income

Determinants of Demand• Availability and price of substitute goods

Determinants of Demand• Availability and price of compliments

Determinants of Demand• Changes to population

Determinants of Demand• Expectations of the Future

A trick to remember determinants of demand

• TRIBET = tastes of consumers

R = Related goods (P$ change)

I = Income of consumers

B = # of consumers

E = expectations of future

http://quizlet.com/2043838/individual-markets-flash-cards/

Quantity

$

Graphically speaking… Demand of movie tickets

D*

A RAISE!!!!

A Child!!!!

D after raise

A. The price of iPods falls

B. The price of music downloads falls

C. The price of CDs falls

A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11

Demand CurveDemand Curve

28

Draw a demand curve for music downloads. What happens to it in each of the following scenarios? Why?

A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11

A. Price of iPods fallsA. Price of iPods falls

29

Q2

Price of music down-loads

Quantity of music downloads

D1D2

P1

Q1

Music downloads and iPods are complements.

A fall in price of iPods shifts the demand curve for music downloads to the right.

Music downloads and iPods are complements.

A fall in price of iPods shifts the demand curve for music downloads to the right.

A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11

B. Price of music downloads fallsB. Price of music downloads falls

30

The D curve does not shift.

Move down along curve to a point with lower P, higher Q.

The D curve does not shift.

Move down along curve to a point with lower P, higher Q.

Price of music down-loads

Quantity of music downloads

D1

P1

Q1 Q2

P2

A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11

C. Price of CDs fallsC. Price of CDs falls

31

P1

Q1

CDs and music downloads are substitutes.

A fall in price of CDs shifts demand for music downloads to the left.

CDs and music downloads are substitutes.

A fall in price of CDs shifts demand for music downloads to the left.

Price of music down-loads

Quantity of music downloads

D1D2

Q2

TRIBE

Assignment due next Fri

For each part of the:

Formulate two scenarios and graph For example:Beef marketConsumers see news story about mad cow disease