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Chapter 4, Section 2
Be able to distinguish a change in quantity
demanded from a change in demand
Know the reasons why demand curves may
shift to the right (increase in demand) or left
(decrease in demand)
Learn and be able to provide examples of the
five factors that may shift demand
Understand the difference between normal,
inferior and neutral goods
Be able to classify goods as substitutes for or
complements to other goods
Unlike a change
in Qd, which
involves a
along an
demand curve,
a change in
demand involves
a shifting of the
entire demand
An increase in demand means that more people
are willing and able to buy a good at each price
A decrease in demand means fewer people are
willing and able to buy a good at each price point
On Monday, buyers buy 300 units at $5 each. On
Tuesday, they buy 450 units at $4 each. Does this
represent an increase in demand?
NO!! The Qd changed because the price changed!
A change in demand would occur if they bought
450 units at the $5 price on Tuesday.
Five factors:
(1) Changes in income
Question: Does an increase in income
necessarily cause an increase in demand
for a good that someone usually buys?
NO!! Higher income may lead to an
increase in demand for some goods
(normal goods), decrease for others
(inferior goods), and no effect on some
(neutral goods)
Write down an example of each type of
good for you and explain why each is
normal, inferior or neutral
(2) Preferences (tastes)—as styles and
preferences change, demand for particular
goods may increase or decrease
(3) Prices of related goods—substitutes and
Substitutes—demand for “A” moves in
same direction as price of “B”
Example—if Papa John’s cuts pizza prices
$1, the demand for Pizza Hut pizzas will
Complements—demand for “A” moves in
the opposite direction as price of “B”
Example—if golf clubs go on sale, what
would you expect to happen to demand for
golf balls?
(4) number of buyers—more buyers in a given
area tends to increase demand, and vice-versa
(5) future price—if buyers expect prices to go
up in the future, this tends to increase current
Example: Weather forecasters predict a harsh
winter, even several freezes in Florida. What
effect will this probably have on current
demand for frozen orange juice?
Answer questions 1, 3 and 4 on page 99.
Turn in for class participation credit.
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