Oakland Schools Economics Moodle

1. Determinants of
Demand

2. Review: Change in QuantityReview: Change in Quantity
DemandedDemanded
Quantity
Price
D1

3. On to … Determinants of Demand

4. DETERMINANTS OF DEMAND
Changes in income
Changes in the prices of related goods
 Substitutes: goods that can replace one another
 Compliments: goods that are consumed together
Changes in the size or composition of
the population
Change in price expectations
Changes in tastes/preferences

5. Practice Problem #1
What would happen to the demand of
pizza if you find out pizza causes
heart disease?
• Determinant?
• Increase or decrease in demand?

6. Answer to Practice Problem #1
What would happen to the demand
for pizza if you find out that pizza
causes heart disease?
• Determinant - A change in consumer
tastes/preferences; consumer
expectations
• Decrease in demand

7. Practice Problem #2
What would happen to the demand of Nike
shoes if it is the favorite shoe of many
sports celebrities?
• Determinant?
• Increase or decrease in demand?

8. Answer to Practice Problem #2
What would happen to the demand of Nike
shoes if it is the favorite shoe of many
sports celebrities?
• Determinant – A change in consumer
tastes/preferences
• Increase in demand

9. Practice Problem #3
•A new energy drink comes to
market that does not have
negative side effects (e.g., jitters,
crashes).
• Determinant?
• Increase or decrease in demand of Red Bull?

10. Answer to Practice Problem #3
• A new energy drink comes to market
that does not have negative side
effects (e.g., jitters, crashes).
• Determinant – A related good (substitute)
• Decrease in demand of Red Bull

11. Practice Problem # 4
•Student allowances and the
minimum wage for work
increases.
• Determinant?
• Increase or decrease in demand of video
games?

12. Practice Problem # 4
•Student allowances and the
minimum wage for work
increases.
• Determinant – Income increase
• Increase in demand of video games

13. Movement Along a Demand Curve
Versus a Shift of the Curve
• Remember there is a difference between quantity
demanded and demand.
• Markets never stand still, there are always outside factors
that change the actual price of the good or how much is
demanded altogether.
• A change price creates a change in the quantity
demanded, other things constant.
▫ This causes a movement along the demand curve.
• A change in one of the determinants of demand causes a
change in demand.
▫ This causes in a shift of a demand curve. Or a new curve.

14. What determinants would
increase the market
demand for pizza?

15. Determinants Increasing Demand
• Increases in income
• Increases in population
• Increase in prices of substitute goods
• Decrease in price of complement goods
• Consumer expectation that prices will increase
in the future
• Improvement in taste
• Increased consumer preferences

16. Determinants of increased demand change
the story….. How so?
Quantity
demanded of
pizza per week
(by millions)
Price of pizza
15 $15.00
20 $12.00
25 $9.00
30 $6.00
35 $3.00
--- $0.00
Quantity
demanded of
pizza per week
(by millions)
Price of pizza
9 $15.00
14 $12.00
19 $9.00
25 $6.00
30 $3.00
--- $0.00
Original Story New Story

17. 8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
How would determinants of increased demand
change the picture of demand?
b

18. 8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
Increased Market Demand for Pizza
D2
fb

19. What determinants would
decrease the market
demand for pizza?

20. Determinants Decreasing Demand
• Decreases in income
• Decreases in population
• Decrease in prices of substitute goods
• Increase in price of complement goods
• Consumer expectation that prices will decrease
in the future
• Deterioration of taste
• Decreased consumer preferences

21. Determinants of decreased demand change
the story….. How so?
Quantity
demanded of
pizza per week
(by millions)
Price of pizza
5 $15.00
10 $12.00
15 $9.00
20 $6.00
25 $3.00
--- $0.00
Quantity
demanded of
pizza per week
(by millions)
Price of pizza
9 $15.00
14 $12.00
19 $9.00
25 $6.00
30 $3.00
--- $0.00
Original Story New Story

22. 8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
D1
How would determinants of decreased demand
change the picture of demand?
b

23. b
D2
Decreased Market Demand for Pizza
8 14 20 26 32
Millions of pizzas per week
$15
12
9
6
3
0
Priceperpizza
j
D1