ECON 1200 1st Edition Lecture 8Change in Quantity Demanded Change in Demand- Change in Demand- When a demand variable OTHER THAN PRICE changes, we shift the demand curve right for an increase in demand and left for a decrease in demand- REASONS WHY THE DEMAND CURVE MAY SHIFT:o Incomeo Prices of related goodso Tasteso Populationo Expected future prices- INCOME:o Normal Goods- A good for which the demand increases as income rises and decreases asincome fallso Inferior Goods- A good for which the demand increases as income falls and decreases as income riseso A Bad- A product one would never pay for (example… sewage)- PRICES OF RELATED GOODS:o Substitutes- Goods and services that can be used for the same purposes When 2 goods are substitutes, the more you buy of one good, the less you will buy of the other- When almonds and cashews are substitutes and the price of almonds increases… consumers will buy more cashews because the goods are interchangeable and the demand curve for cashews will increase (shift right)o Complements- Goods and services that can be used together When 2 goods are complements, the more you buy of one good, the more you buy of another- When tomatoes and basil are complements and the price of tomatoes increases, the quantity demanded of tomatoes in the tomato market decreases and the demand for basil decrease (the curve shifts left) in the market for basil- TASTES:o The many subjective elements that affect a consumer’s decision to buy a product- POPULATION/DEMOGRAPHICS:o Demographics- The characteristics of a population with respect to age, race, and gender Certain demographics demand certain goods As demographics change, the demand for particular products will increase (shift right) or decrease (shift left) because different categories of people tend to have different preferences- EXPECTED FUTURE PRICES:o When buyers expect the future price of a good to increase, they “stock up” on the good in the present when the price is low (like sales) Causes the demand for the good to increase (shift right) in the presento When buyers expect the future price of a good to decrease, consumers won’t buy it in the present when the price is high (like seasonal items) Causes the demand for the good to decrease (shift left) in the presentSUPPLY:- Quantity Supplied- The amount of a good or service that a firm is willing and able to supply at a given price- Supply Schedule- A table that shows the relationship between the price of a product and the quantity of that product supplied- Supply Curve- A graph that shows the relationship between the price of a product and the quantity of that product supplied- Each point on a supply curve is a quantity supplied corresponding to a specific price; together, the points represent supply over a range of prices- There is a positive (or direct) relationship between price and quantity suppliedo This is why the supply curve slopes upward- Law of Supply- The rule that… holding all else constant, increases in price cause increases in the quantity supplied and decreases in price cause decreases in the quantity