Demand Shifters

Demand Shifters
 Lesson Terms
• Law of Demand
• Price
• Quantity
• Demand
• Demand Curve
• Quantity Demanded
• Non-Price Factors

Demand Shifters
The Demand Curve

Demand Shifters
 Demand Curve Terms
• Law of Demand*
• When the price of a good or service increases, the quantity demanded for that
good or service decreases OR
• When the price of a good or service decreases, the quantity demanded for the
good or service increases.
• Demand
• The relationship between all various prices and all quantities consumers are
willing and able to buy during some time period.
• Quantity Demanded
• The amount of a good or service people are willing and able to buy at one
particular price.
• It is represented by a single point on the demand curve for one price and one
quantity.

Demand Shifters
The Demand Curve Revisited

Demand Shifters
 Demand Shifters
• Non-price factors that created an increase or decrease in demand are
called demand shifters.
• These factors include:
• Changes in consumer income
• Changes in the number of consumers
• Changes in the price of substitute goods
• Changes in the price of complimentary goods
• Changes in consumer taste and preference
• Changes in consumer expectation
• Reminder: a change in price does NOT change demand. It changes
the quantity demanded.
Demand Shifters
 When Demand Shifts
• Demand increases (shifts to the
right) when the quantity
demanded at every given price
increases.
• Demand decreases (shifts to the
left) when the quantity
demanded at every given price
decreases.

Demand Shifters
Changes in Consumer Income
• If consumer income increases, demand for most goods and services
will increase. The reverse is also true: if consumer income
decreases, demand for most goods and services will decrease.
• For example:
• If workers at a manufacturing facility sign a new contract that provides a 5%
raise, these workers will have more income and their demand for goods and
services will increase.
• If the government increases taxes, consumers will have less take-home pay,
and as a result, their demand for goods and services will decrease.

Demand Shifters
Changes in the Number of Consumers
• If the number of consumers in the market for a product increases,
the demand for the product will increase. If the number decreases,
the demand for the product will decrease.
• For example:
• If a new high school is built in the same block as a fast food restaurant, the
demand for the fast-food restaurant's products will increase.
• When the school closes for summer vacation, the demand for the fast-food
restaurant's products will decrease.

Demand Shifters
 Change in the Price of
Substitute Goods
• A change in the price of one good can change the demand for
another good. One type of related goods is substitutes—goods that
are bought in place of other goods.
• For example:
• If the price of cable TV increases, the demand for home streaming services
may increase as consumers switch from cable TV to home streaming services.
• If the price of Hamburger Heaven's hamburgers decreases, the demand for Big
Burger's hamburgers may decrease as consumers begin to go to Hamburger
Heaven, instead of Big Burger, for a less expensive burger.

Demand Shifters
 Change in the Price of
Complementary Goods
• A change in the price of one good can change the demand for
another good. One type of related goods is complements—goods
that are purchased together.
• For example:
• A decrease in the price of strawberries will cause an increase in the demand
for whipped cream.
• An increase in the price of hamburger will cause a decrease in the demand for
hamburger buns.

Demand Shifters
 Changes in Consumer Taste
& Preferences
• If consumer tastes for a product change, the demand for the product
will change.
• For example:
• If interior design magazines are showing designs with bold printed wallpaper,
the demand for bold printed wallpaper will increase.
• If interior design magazines are showing articles against using bold printed
wallpaper, the demand for bold printed wallpaper will decrease.

Demand Shifters
 Changes in Consumer Expectations
• If consumers expect the price for a product to increase (or decrease)
in the future, the current demand for the good will change.
• For example:
• If prices for a gaming console are expected to increase right after Memorial
Day, the demand for the gaming console will increase in early May.
• If prices for a gaming console are expected to drop right before Christmas, the
demand for the gaming console will decrease in November.

Demand Shifters
 Test Your Knowledge
Suppose there is a new bottled drink called Bubble Soda.
• What would happen to the demand for Bubble Soda if:
• a famous celebrity started advertising for it, saying it is his/her favorite drink?
• it started selling in all school cafeterias?
• it started to make people’s teeth turn green?
• the price increased?
• the price of Too Cool Cola (a substitute) is decreased?
• many people lost their jobs and had to reduce their spending?
• the price of Bubble Corn (a complement) is decreased?

Demand Shifters