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Unformatted text preview: We have been looking at how changes in price can affect buyers' decisions: when price increases, demand decreases, and vice versa. However we have been assuming that when the price changes, all else is staying the same; this restriction allows us to use the same demand curve, with changes in demand being represented by movements up and down the same curve. This model of a buyer moving up and down one demand curve is correct if the only thing that is changing is the price of the good. If preferences or income change, however, the demand curve can actually shift. For example, let's say that Conan's initial demand curve for concert tickets looks like curve 1. If Conan gets a new job, with a permanently higher income, however, his demand curve will shift outwards, to curve 2. Why is this? Conan realizes that he has more money, and that, as long as he doesn't lose his new job, he will always have more...
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This note was uploaded on 12/13/2011 for the course ECO 1320 taught by Professor Staff during the Fall '11 term at Texas State.
- Fall '11