PRICE
Shifts in the Demand Curve
QUANTITY
Ceteris Paribus
Latin phrase for “all other things held
constant”
The demand schedule takes only changes in
price into account. It does not take news
accounts, ads, weather, or any other factors
into account.
Normal Good
A good that consumers demand more of
when their incomes increase.
Because Mr. Fulk got a raise, he started
buying more McChickens on his way home.
Inferior Good
A good that consumers demand
less of when their incomes
increase
Because Mr. Fulk got a raise he
was able to buy Real Coca-Cola
instead of Kroger brand cola.
Complements
Two goods that are bought and used together
Mr. Fulk loves hamburgers but he is not on an
Adkins diet. Therefore when he buys
hamburgers he can not forget the buns!
* Just don’t eat the last bite!
Substitutes
Goods used in place
of one another.
If the price of
snowboards goes
up Mr. Fulk will just
have to go and buy
skis instead!
Changes in demand
A demand curve is accurate as long as there are no
changes other than price that could affect the
consumer’s decision. So as long as all things hold
constant (ceteris paribus), then a demand curve will
is accurate.
When we move along the curve we refer to this as a
change in quantity demanded.
What causes a shift in
the demand curve?
The change in the price does NOT cause the
demand curve to shift. These changes are
already built into the demand curve.
Income – when you make more, you spend more
Consumer Expectations – Haja said buy gas or
else!
Population – more people, more demand
Consumer tastes and advertising – who knew
telling people your every move would be so
important?
What is an example of
an inferior good?
When Mr. Fulk was a broke college student
Mr. and Mrs. Fulk only bought Big K instead
of Coke. Mr. and Mrs. Fulk also shared a meal
at P.F. Changs to save money. Now, Mrs. Fulk
gets her own plate…and if she is a member
of the clean plate club she just might get
some dessert.
What is one good that can be
considered a complement for
another?
Hot dogs and buns
Skis and boots
What others do you have?
What are two goods that can
be considered substitutes?
Skis vs. snowboards
A cab vs. a bus
What others can you come up with?
What is the difference
between a shift along a
demand curve and a shift of a
demand curve?
A shift along the demand curve is caused by a change
in price.
A shift of a demand curve is caused by factors other
than a change in price that lead to a change in
demand.
A computer manufacturer
lowers its prices. (computers)
PRICE
A change in price will mean
just a shift along the
demand curve.
Lower price = more demand
QUANTITY
A volleyball maker convinces high
schools to fund varsity volleyball
teams. (volleyballs)
PRICE
A change other than price
will cause a shift of a curve.
QUANTITY
A freeze ruins the orange crop,
and orange juice prices rise.
(apple juice)
PRICE
A change other than price
will cause a shift of a curve.
QUANTITY
What would happen to the
demand curve for OJ?