normal products:products whose demand changes directly with incomeinferior products:products whose demand changes inversely with income
37CHAPTER 2 Demand and SupplyPRICES OF OTHER PRODUCTSSubstitute productsare products that can be consumed in place of one another, such as butter and margarine, or cell phones and landline-based phones. When the price of a product rises, consumers choose to purchase more of any reasonable substitute available, thus shifting the substitute product’s demand curve to the right. For example, a higher price for butter causes some consumers to switch to margarine, increasing the demand for margarine. If the price of cell phones falls, however, there will be a decrease in the demand for landline-based phones.Complementary productsare products that are consumed together, such as cars and gasoline, or video games and video game consoles. In the case of complementary prod-ucts, an increase in the price of one product causes a decrease in demand for its complement. For example, if the prices of cars rise, the demand for gasoline falls.The reverse is also true: a fall in the price of video games leads to a rise in demand for video game consoles.CONSUMER PREFERENCESPeople’s preferences also affect buying patterns. A significant shift in consumer concerns over nutrition, for example, causes an increase in the demand for nutritious foods. Consumer preferences are also influenced by current fashion or advertising, as in the case of clothing. This is illustrated by a sudden fad for a particular brand of running shoes, which increases their demand and shifts this product’s demand curve to the right.CONSUMER EXPECTATIONSThe expectations that consumers have about future changes in prices and their own incomes affect their current purchases. For example, if a majority of consumers expect the price of laptop computers to fall, the current demand for laptops decreases. This is because consumers will delay their purchases of laptops until the expected drop in price occurs. Alternatively, if consumers expect their incomes to grow and the prices of products they buy to remain constant—in other words, if they expect their standard of living to rise—their current demand for normal products will increase, and their current demand for inferior products will decrease.Change in Quantity Demanded versus Change in DemandThe terms change in quantity demandedand change in demand, have special meanings in economics. Both types of change are shown in Figure 2.4. As we have seen, a change in quantity demanded results from a change in the product’s own price. For example, the number of skis purchased per month will increase when the price of skis decreases, as shown on the graph on the left in Figure 2.4. Here a movement (from point ato point b) occurs along demand curve D0, since varying the product’s own price does not alter the position of the curve. An increase or decrease in demand, however, results from a change in a demand factor. For example, a change in consumer preferences or in consumer
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