251Ch3lecture3Notes

251Ch3lecture3Notes - demand for tea Ch3: Demand and Supply...

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8/28/2011 1 1 Chapter 3: Demand and Supply Lecture 3: Shifts in demand Ch3: Demand and Supply Lecture 3: Shifts in demand 2 Determinants of Demand Demand increase: Shift to right Demand decrease: Shift to left P Q D D’ P Q D D’ Ch3: Demand and Supply 3 Changes (shifts) in Demand 1. Income ▪ Normal goods : goods where demand rises when income rises and falls when income falls ▪ Inferior goods : goods where demand rises when income falls and demand falls when income rises Ch3: Demand and Supply 4 Changes in Demand, continued 2. Prices of related goods Substitutes = Goods that are used in place of one another ex.) Coffee vs Tea Increase in the price of coffee increases the
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Unformatted text preview: demand for tea Ch3: Demand and Supply 5 Changes in Demand, continued Complements = Goods that are used together ex.) Coffee and cream Increase in the price of coffee decreases the demand for cream Ch3: Demand and Supply 6 Changes in Demand, continued 3. Changes in expectations Price expect price to rise current demand expect price to fall current demand Income expect income to rise D for normal goods and D for inferior goods 8/28/2011 2 Ch3: Demand and Supply 7 Changes in Demand, continued 4. Tastes and Preferences 5. Number of Buyers more buyers D fewer buyers D...
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251Ch3lecture3Notes - demand for tea Ch3: Demand and Supply...

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