Shifts in Demand

Question 1

How and why does demand change?

Answer 1

• a change in the price of the product (ONLY THE PRODUCT)

- anything else

Question 2

Quantity Demanded vs Price

Answer 2

1. Change in quantity demanded
2. price of the product changes
3. movement along the demand curve

Question 3

Changes in any other variable

Answer 3

The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve. Any change when the price does not change.

Question 4

What are the circumstances which can cause the demand curve to shift in?

Answer 4

1. Changes in the price of substitute
2. Changes in complement
3. Change in income if good is normal good
4. Change in income in good is inferior good

Question 5

What are substitutes?

Answer 5

Some goods are considered to be substitutes for one another: you don’t consume them together, but you chose to pick one or another.

If the price of the substitute goes up, the quantity demanded of the good you’re looking at it goes up.

Question 6

What are complements?

Answer 6

Think about two goods that are typically consumed together. For example, bagels and cream cheese. We call these types of goods complements.

If the price of a bagel goes up, the Law of Demand states that we will be able to buy less bagels. The same applies to cream cheese as we will use it less since there is less bagels.

Therefore, when two goods are complements, there is an inverse relationship between the price of one good and the demand for the other good.

Question 7

Normal Goods - income effect

Answer 7

For most goods, there is a direct relationship between a consumer’s income and the amount of the good that one is willing and able to buy.

Question 8

Inferior Goods

Answer 8

Products consumed when we have a low income levels, for example during University, eating two-minutes noodles and chicken nuggets.

Income goes up, and the demand goes down of that product.