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 movement along an existing demand curve, a change in demand involves a shifting of the entire demand curve An increase in demand means that more people are willing and able to buy a good at each price point A decrease in demand means fewer people are willing and able to buy a good at each price point Examples: 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 complements 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 decrease 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 demand 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.