Demand Curve Shifters determinants of demand Normal good a good that is positively related to income an increase in income causes increase in demand at each prices shifting the D curve to the right and vice versa a decrease in income causes a decrease in demand inferior good negatively related to income Shifts movements of curvesan increase in income causes a decrease in demand at each price and vice versa A decrease in income causes an increase in demand and the D curve to shift to the right if people expect their incomes to rise their demand for meal at expensive restaurants may increase now complements if an increase in the price of once causes a fall in demand for the other substitutes if an increase in the price of one causes and increase in demand for the other shifting the D curve to the left ex Bus service staple foods Demand curve shifter price of related goods Computers software bagels and cream cheese Coke and Pepsi bus and subway Anything that causes a shift in taste TOWARD a good Tastes Expectations cid 127 Quantity Supplied price causes a movement along the S curve Supply Curve Shifters determinants of supply increase in supply rightward shift of supply curve Input prices ex wages and price of raw materials a fall in the input price makes production more profitable at each output prices determines how much inputs are required to produce a unit of output so firms technology a cost saving an in number of sellers expectations an increase in the number of sellers increases the supply a firm expects the price of the good it sells to rise in the future it may reduce supply Steps 1 decide whether the even shifts S or D curve or both 2 decide in which direction the curve shifts EQ quantity increases ambiguous price if supply increases more then demand P falls if demand increases more than supply P increases 3 use supply demand diagram to see how the shift change equilibrium P and equilibrium Q cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127
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