Lecture 4s.pdf

# Being equal how price affects quantity of goods

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being equal, how price affects quantity of goods demanded. Other Things: Anything that potentially determines the buyers’ demand for a good, other than the good’s price. Questions: What are these “other things”?

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GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Number of Buyers: Increases in # of buyers Increases in quantity demanded at each price - It shifts the demand curve to the right. (Demand curve shifts outward.) Decreases in # of buyers decreases in quantity demanded at each price - It shifts the demand curve to the left. (Demand curve shifts inward.)
GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters: Number of Buyers Suppose the number of buyers increases. Then, at each P, Q d will increase (by 5 in this example). \$0.00 \$1.00 \$2.00 \$3.00 \$4.00 \$5.00 \$6.00 0 5 10 15 20 25 30 P Q

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GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Income It seems that people demand more of a good if they have higher income. This is not necessarily true. Two types of goods: Normal vs Inferior Normal Goods: Other things equal, an increase in income leads to an increase in the demand. Inferior Goods: Other things equal, an increase in income leads to a decrease in the demand. Example: Instant Noodles.
GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Price of Related Goods Here we consider the prices of two types of related goods. Price of Substitutes Two goods are substitutes if an increase in the price of one leads to an increase in the demand for the other. Example: Pizza and Burgers An increase in the price of pizza increases the demand for burger, shifting burger demand curve to the right. Other examples: Coke vs Pepsi; Laptops vs Tablets; PlayStation vs Xbox; and so forth.

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GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Price of Related Goods Here we consider the prices of two types of related goods. Price of Complements Two goods are complements if an increase in the price of one leads to a decrease in the demand for the other. Example: Computer and Software If price of computers rises, people buy fewer computers, and therefore less software; Software demand curve shifts left Other examples: College tuition and textbooks; cheese and bread; and so forth.
GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Tastes Anything that causes a shift in tastes toward a good will increase demand for that good and shift its demand curve to the right Example: When research suggests that certain superfood (e.g. garlic and so forth) reduces the occurrence of cancer, demand of these superfood shifts outward.

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GESB 1006: Economics of Everyday Life University of Macau Demand Curve Shifters Expectations about the Future Expected increases in future income induce increases in current demand.
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