Shifting Demand - Online Tutor, Practice Problems & Exam Prep

Demand can shift due to various factors, including consumer income, preferences, and the number of consumers. An increase in consumer income typically raises demand for normal goods while decreasing demand for inferior goods. Substitute goods see increased demand when the price of a related good rises, while complementary goods experience decreased demand when the price of one rises. Additionally, consumer expectations about future prices can influence current demand. Understanding these dynamics is crucial for analyzing market behavior and demand curves.

Shifting Demand - Warning!

Alright, so now we're going to discuss some of the things that can cause demand to change. There are going to be certain events that cause shifts in our graph. Our demand line might move from where it originally was, and I want to make a big bold warning right away that a change in price is not going to shift the demand curve. We're only going to move along the demand curve, not shift and draw a whole new curve. Cool? So let me show you an example on these graphs real quick. On the left, we're going to discuss a change in price, and on the right, we're going to talk about other determinants of demand. When I say determinant, it's something that determines demand, right? What makes demand what it is? It's other factors that we're going to discuss: these other things that happen in the background. Cool, but first let's talk about this change in price.

So, remember first things first, let's label our axes; we've got price here and quantity here, right? Alphabetical order PQ left to right. Okay, and let's go ahead and just, without numbers, we are going to use some terminology here that I've put in the middle. P₁ and Q₁. When we use this P₁ and Q₁, that means it's the original situation, and then P₂ and Q₂ is what happened after we made the change.

Let me show you on the graph what I mean by that. So, let's say we started here on the graph, it's red, at this point right here where we demanded quantity 1 at a price of P₁, right? Whatever price that was and whatever quantity that was. We're going to do a lot of our analysis like this without numbers. So, we started at that price, but let's say the price increased here to P₂. Nothing else changed. Remember ceteris paribus; nothing changed here except the price. So, what's going to happen? We're at this new price here, and this new quantity here, right. We didn't draw a new demand curve. All that happened was there was this decrease in quantity demanded. So, the quantity demanded decreased because the price increased, right. This is a distinction that we're trying to make and I'm trying to make clear to you right now, that there's going to be a difference when we have a change in price rather than a change in one of these other determinants, and we're going to discuss every determinant in detail coming up.

But as an example, let's say consumer income changes, or even easier, preferences. Let's say that consumers prefer this good now, they rather have this good than something else. We're going to discuss that in more detail, but let's say they want this good more, we're going to shift this graph to the right. Okay, we're going to have this new notice I drew a new demand curve here, and this is an increase in demand, not an increase in quantity demanded because notice the price isn't what's changing here. Something else other than price is changing. So let's say we were at this price right here. Again, let's label our axes P and Q. We were at this price P₁ and we were at this quantity demanded Q₁. And notice, not the price didn't change here. But what happened is now, or excuse me, at the same price, I wanna go the other way on the graph. At this same price, our quantity demanded is much higher. Right? So over here, on the left-hand side, we had a change in the price and a change in the quantity demanded, right? Here, notice the price stayed the same, but the quantity demanded went way up at that price. You understand? So it's because we have a new demand curve that we drew. So we had here, we'll call this D₁ for the 1st demand curve and D₂ for the 2nd demand curve.

Right, notice in this situation we drew a new curve, so it's an increase or decrease in demand. Kids get this wrong all the time, right. This is a huge confusion point for a lot of students, so just take a second to hammer this in, and you might even want to come back to this lesson after you understand all the changes in demand, but I did want to point this out first just so you have it in your head. And I have this point at the bottom here: all else equal, all else not equal, right. So here in the change in price, everything else is staying the same. The only thing that's changing is price, right? And we're affecting our quantity demanded here. I just wanted to make a point that we are still holding our ceteris paribus conditions even on the right where I have all else not equal; the idea is everything else is staying equal except this one thing that's changing. We're still holding everything else equal. So ceteris paribus still holds in this case, there's just one thing that's changing such as the income of the consumer or the preferences of the consumer, something like that. Cool? Alright, I'm going to end this video right now, and then we will continue at the bottom of the page. Let's do it.

Shifting Right and Shifting Left

Alright. So let's continue here. One more note I want to make about when we're shifting, we're either going to shift to the right or to the left on the graph, okay, and I like to think of it because a lot of this when we're looking at these shifts, a lot of it is very logical and you just kind of have to think about whether it is a good thing that's happening for the product or a bad thing that's happening for the product, right? When you think of it like that, I think it makes it a little easier to know whether you should shift right or left. So you shift right when it's a good thing. Something good happened, we're going to shift to the right. Okay. So we would have something like this. Let me go to blue. We'd have our new demand curve shifting to the right. We would shift to the right here. Cool? I'll do that in a different color. Alright. And when we have a bad thing happen for the product, something unfavorable for the product, we're going to shift to the left. So we'll have our new demand curve out here. Cool. So we will have from there we go this way this time. Alright and we've shifted to the left. That's the only note I wanted to make here. I'll just get out of the way so you see that text. Yeah, so let's try and think of it as good things and bad things. So good things are going to shift to the right, bad things to the left. Cool. Let's go ahead and try that in our first example here.

Consumer Income:Normal Goods and Inferior Goods

So, a factor that could cause demand to shift for a product is the income of the consumer. Let's check it out. As a consumer's income changes, the types of goods they buy also change. Let's think about when you were living back at mom's house. You come home, have a nice steak dinner, right? Go to bed in a nice queen-size bed. Life was good. Queen-sized queen-size bed. And now you're in a dorm room. What do you get here? Ramen noodles every night, and I'm assuming this is what I picture you. I'm assuming you're all just like sharing bunk beds with strangers right now with strangers. Right? Kind of a downgrade from mom's house, but you'll see that the types of goods here are different. At mom's house, we could say that things were a little better. So let's go ahead and define what those are. So we'll say that people buy more of what are called normal goods when they have more money, and just the opposite, people buy more inferior goods when they have less money. So you can kind of follow the logic here, right? Normal goods could be things like what you had at mom's house or what I've listed here: we've got organic food, new furniture, or even going on vacation we could count as a normal good. When we compare it to these inferior goods like buying canned soup or buying used furniture off Craigslist or a staycation where you just take your days off and just stay home because you got no money. Cool, so that's the idea here. We're going to have our normal goods and our inferior goods, and when we think of the consumer income, if that changes, we gotta think is our product a normal good or an inferior good and how is this income change going to affect the demand for the product. I've got an example coming up; let's try it out.

Consumer Income

Alright, let's see this example. If craft beer is a normal good, what happens to demand when consumer income rises? What if it decreases? So let's handle these 1 at a time, and I want to make a quick point here about these types of problems. They're going to generally have to tell you whether a product is a normal good or an inferior good because it's kind of hard to assume that you would be able to guess on the test. So, I would expect on the test; they're going to be telling you when things are normal goods and inferior goods. Alright. So in this question, they do tell us that craft beer is a normal good, and what happens to normal goods when income rises, right? When income rises, we buy more normal goods. So the income rising causes the demand to shift to the right. It's a good thing, right? Income rising is a good thing for a normal good. That's how I like to think about it. So, the increased income is going to increase our demand. So let's go ahead and label our axis here. I just want to get into that habit. We got our price on our y-axis and quantity on our x-axis, right, alphabetical order left to right, and we are going to draw our new demand curve right here. Let's go ahead and draw it as income increases. Remember, normal good demand is going to increase because of the income increase. So, I'm going to draw a new demand curve out here, and we'll call that d2. So, we've got this one was d1 over here, and this will be d2, our shift to the right. Right. And what does this mean? This means that at a certain price, if I were to say our price was right here, p 1. Remember, the price isn't changing; it's the people's demand that's changing here. So at the same price, we're actually demanding a higher quantity, right? This was where we were originally demanding and now we're demanding somewhere out here at quantity 2, right. So it increased from quantity 1 to quantity 2 at that same price. Cool, and that's because income increased and normal good demand increases with income increases. Alright. Let's look at the opposite. I'm going to get out of the way here. So if income decreases and beer is craft beer is a normal good, right, so we gotta think. People buy more normal goods when they have more money; they have less money now, so they're going to buy less normal goods. So, we are going to draw a new demand curve here to the left of our original one, and when you draw them, especially when we don't have numbers, and stuff, I don't mind going out of the graph like that just to keep it consistent, you know, keep them even. So I don't see why there's a problem with that, especially when we've got no numbers. So there we go. That is our shift to the left where we had a demand curve here, demand 1, and now we are in demand 2 because income is lower, And we see the same thing happening, right? We've got the same price. Let's say this was our price right here, and notice what happened. We were originally demanding about this much, quantity 1, but now we're over here demanding this much at the same price, quantity 2. So we're demanding much less at the same price. Cool. So that is how income, consumer income, can affect the demand for a good based on it being a normal good or an inferior good. Cool. Let's move on now.

Substitute Goods

So now we can see how the price of another good, in this case, a substitute good, can affect the demand for our product. There are going to be other goods related to our product that can affect our demand. The first one we want to talk about here are substitute goods. We define those by saying that when there's an increase in the price of Good X, it's going to cause the demand for Good Y to increase. Alright, this sounds a little complex, so let's think about it a little bit. This is the idea that one product's price is going up, which causes the demand for another product to increase. They're actually substituting their demand for this new product, right? The idea is since the price went up on this first product, we're going instead to buy this other thing instead.

So, I want to make a note, when two things go up together, when we have variables that are increasing together, so in this case, the price of Good X is going up and the demand of Good Y is going up as well, we call this relationship directly proportional, right? They're going up and up together and vice versa, right? If they went down together, it also holds, which is true. So if there was a decrease in the price of Good X, there would be a decrease in the demand for Good Y, right? All of these things are going to be vice versa, just like that.

And one more note is that we are not talking about a change in price here. I know we did say that there was an increase in the price of Good X, right? So, you're thinking this could be a change in price, but we are analyzing the demand for Good Y. We're not worried about the demand for Good X in this situation, okay? So the idea here is that we're looking at how the price change of Good X is affecting the demand for Good Y. Our focus is on Y. There hasn't been a price change to Good Y, right. There was only a price change to Good X. This sounds a bit technical, but I think once we do a couple of examples here, it'll make more sense.

So let's go ahead and look at some of these example substitute goods. A great example here is Coke and Pepsi, right. So, if we were to see that the price of Coke were to increase, I'll do it like this, the price of Coke increases, right, what's going to happen to Pepsi? We're going to see the demand for Pepsi increase, and that makes sense, right, because people are going to switch their consumption. They're no longer going to be buying Coke. They don't really see a difference between the two; they're just going to buy Pepsi instead. Yeah, I know there are some of you that are like, "no, I only buy Coke," blah blah blah. We're not talking about you. You would probably stay with Coke, but there are going to be other people that are switching their demand, right. So we are going to see the demand for Pepsi going up there.

Same thing here with margarine and butter, right. Same example. Let's go ahead and say, well in this case, let's say that the price of margarine, I'm just going to put margarine, the price of margarine goes down in this situation. Okay. What's going to happen to the market for butter? Well, now people are going to buy margarine instead of butter, right, that's the idea. So the demand for butter, and let me put butter down here, and over here I want to put Pepsi as well, I forgot to write that in. Does that make sense? Yes, so the demand for butter is going to decrease.

I've got one more example here, apples and oranges, right? So yes, we are able to compare apples and oranges in a sense here. I'll do a similar example. So let's say the price of apples was to go up, what's going to happen to the demand for oranges? Well, assuming that people substitute an apple for in their fruit consumption, we're going to say that the demand for oranges is going to go up because people will buy these oranges instead of the higher-priced apples. Cool? So let's go ahead and try one of these examples on the graph, so you let's do that in the next video.

Substitute Goods

Assume that regular toasters and defibrillator toasters are substitute goods. If the price of regular toasters rises, a) what happens to the demand for defibrillator toasters, and b) what happens to the demand for regular toasters? Look at that thing. That thing's awesome. Right? Alright. So let's see what happens here. What we do know is that the price of regular toasters is going up, and they're asking us what's going to happen to the demand for our defibrillator toasters. Let's use DEF for the defibrillator. What's going to happen to the defibrillator toaster? As we know with substitute goods, when the price of a substitute good rises, the demand for this good is going to increase. Right? So this is, I like to think of it as a good thing happening for defibrillator toasters. The idea is that the price going up for regular toasters is going to cause people to buy more defibrillator toasters instead. So that's a good thing happening for defibrillator toasters, and we know good things shift us to the right. So the demand is going to go up here. Let's go ahead and put this on the graph. If this was our original demand for defibrillator toasters right here at D1, and we'll label our axes too. We've got our price and our quantity down here, in alphabetical order left to right. So, our demand for defibrillator toasters is going to increase. We're going to shift to the right, and we'll draw a new line, nice and parallel here, and that's going to be D2 right there. That is our new demand; we've shifted to the right. Okay, cool.

So, how about part b? What happens to the demand for regular toasters? Right? So what has happened, we know that there was a price increase, right? We had a price increase for regular toasters. So what's going to happen in the market for regular toasters? If one of you went ahead and drew this demand curve here to the left, I want to tell you that you're wrong, and it's a good thing you're here because you will fail the exam if you do that. The idea here is in the market for regular toasters, we are seeing a price change in regular toasters. This is the one thing that keeps us on the same demand curve. So if we were to say we were here originally, let's say that was the original price and quantity. Let's label our axes, P up here, Q down here, and we are going to have this original price P1 and original quantity Q1. Let's say in this situation the price increased. So the price increased here to P2, and at P2, what's going to happen? Notice we're still on the same graph; we did not draw a new line. So because the price increased for regular toasters, the quantity demanded of regular toasters is going to decrease. Notice in this case, I use the QD because we're talking about the quantity demanded, not the whole demand line shifting. So I hope that makes sense to you. That's where we want to be careful. When will the price change affect our product? And that's when we stay on the same line. Cool? So the price change originally, it was affecting the demand for defibrillators, and that's why we drew a new line. Alright. Let's go ahead and move on.

Complementary Goods

Now let's discuss how another related good, a complementary good, can affect the demand for a product. Just like with substitute goods, complementary goods can also impact our demand. Complementary goods are items that are usually bought together. We'll cover some examples shortly, but the main concept is that when the price of good X increases, the demand for good Y decreases. This happens because these items are typically purchased together. So, if the price of one increases, consumers may decide not to buy both items.

Unlike directly proportional relationships, we now define inversely proportional relationships. These are variables that move inversely to each other: when one goes up, the other goes down, and vice versa. With complementary goods, this is exactly what happens. The price of one good increases and the demand for the other good decreases. They have an inverse relationship, also known as an inversely proportional relationship. This scenario involves a change in price of a different product affecting the demand for the product we are analyzing.

Let's discuss some examples of complementary products. A common pair is peanut butter and jelly. If the price of peanut butter increases, the demand for jelly will decrease. This makes sense because they are generally purchased together and a price increase in peanut butter might discourage buyers from purchasing both. Similarly, consider DVD players and DVDs, which are also complementary. If the price of a DVD player decreases, the demand for DVDs will likely increase, as they are usually bought together, and a cheaper DVD player makes DVDs more appealing. Lastly, consider cars and gasoline. If the price of cars goes up, the demand for gasoline will likely decrease.

This logical approach, utilizing our intuition about how products affect each other, is something we will explore more in our upcoming lessons. Let's go ahead and do an example.

Complementary Goods

Alright, so let's do this example. We've got our defibrillator toasters again and now let's assume they are complementary goods with Wonder Bread, defibrillator toasters, and Wonder Bread. So what happens if the price of defibrillator toasters falls? A, what will happen to the demand for Wonder Bread and B, what happens to the demand for defibrillator toasters? Cool. So let's start with Wonder Bread here and we are seeing a price decrease. Right? We're seeing a price decrease in defibrillator toasters. So I'm going to put "price decrease in DEF" and we want to know what happens to Wonder Bread in this situation. So what's going to happen to the demand for Wonder Bread? Right? I'll put WB. So these are complementary goods. They're things that are usually bought together. So since the price of the toaster went down, people are going to buy more bread, right? That's the idea. They're complementary goods, so since the price of the toaster went down, we are going to demand more Wonder Bread. Cool? So let's go ahead and put this on the graph. So remember this is a good thing happening for Wonder Bread, right? The complementary good went down in price, so it's a good thing for Wonder Bread. Let's go ahead and draw the good thing to the right. Yes. Well, first, I always like labeling our graph, price and quantity, and let's go ahead and draw our new demand curve to the right. Yep. So it has shifted to the right and that is our answer here for Wonder Bread. Our demand shifted to the right. I'm going to label these D1 for the original and D2 for our new demand curve. Alright. Let me get out of the way here and let's do the market for defibrillator toasters. So the problem told us that we had a price decrease in defibrillator toasters, and again, how do you think this is going to affect the market for defibrillator toasters? So hopefully you caught this trick from the last video already and what we're going to see is that we're not going to draw a new demand line because the price is what's changing in the market. So we're actually just going to see the quantity demanded going up for defibrillator toasters. Alright, so we're not going to draw a new line because it is the price that is changing here of our product. So if we were here originally and this is our price axis, our quantity axis, right, and now we had a decrease in the price. So our price went from here, and now it's say here. Notice what has happened to our quantity. Our quantity demanded has increased from quantity 1 to quantity 2, so you do not draw a new line there because it was a price change in that market. Alright guys, hope this made sense. Oh actually sorry, we've got one more note here at the bottom. So you see what if the goods are neither substitutes nor complements? So now we're talking about 2 goods that are not substitutes and they're not complements. In that case, the goods are just unrelated, so a price change in one good is not going to affect the demand of the other at all. These are the only types of related goods that we're going to see, substitute and complement, okay? So if they're neither of these, the price changes aren't going to affect each other because they're not related at all. Alright, cool guys. Alright, so let's move on.

Consumer Preferences

Alright, so another factor that can affect the demand for a product is consumer preferences for that product. Consumer preferences change all the time; it's kind of an intangible thing, but when you see it in a problem, it's going to have to be mentioned that preferences are changing. The idea is, if the preferences benefit the good, so if it's some kind of change in consumer preferences, it's going to be a little vague until you see an example, but if it benefits the good in some way, then it's going to increase our demand, right? It's going to shift to the right if it's some sort of beneficial preference change. Obviously, the opposite if it's not a beneficial change, if it's something where they're preferring something else instead, then our demand will shift to the left. Alright, so let's go ahead and see some examples.

The idea that fitness rises in popularity among the consumers can affect the price of fitness-related products, right. So let's say, the preference for fitness goes up, then the demand for fitness products is going to go up. People are going to want fitness products more because they prefer fitness. You see the same thing happening in the fashion industry, right? The demand for different fashions is going to go up and down based on consumer preferences, and cellular phones also saw a big demand shift where people don't even have house phones anymore, right? A lot of people don't even have a house phone; they just have their cell phone, and that's the only way to contact them, so there's been a preference change towards cellular devices. Cool? So let's go ahead and do an example and see this in action.

Consumer Preferences

Alright, let's look at this problem. As a fitness craze sweeps the nation, upside-down yoga class membership has skyrocketed. What happens to the demand for protein shakes? There's a lot of information there, but we're just focusing on protein shakes in the end, right? Look at this hilarious picture. Honestly, that does look kind of fun; I'm sure I would try it. I probably couldn't hang like that, but you know, I'd give it a chance. Alright, so let's go ahead and see what happens to the demand for protein shakes.

The idea is that consumer preferences have moved towards fitness, so you could imagine that the demand for protein shakes is going to increase as well, right? As people's preferences for fitness go up, the demand for fitness-related products like protein shakes is also going to go up. This is a good thing for the protein shake market, right? So what we're going to see is a good thing shifts us to the right. So, let's go ahead and just to beat it in, let's draw in our axis PQ right, left to right alphabetically, and let's draw in our new demand curve. So if this was D1 right here, D2 would be to the right because of the preference shift towards fitness products. We shifted to the right, and D2 is right here; that is our shift to the right because of the consumer preference change. Cool? Alright, let's move on.

Consumer Expectations

Now let's see how consumer expectations about future prices can affect the demand for a good today. So, if consumers are expecting prices to increase in the future, then you could expect them to want to buy the thing today at the cheaper price, right? So the demand for the good today is going to increase. Let me stick to red here. It's going to increase. Alright, so here we have a directly proportional relationship, right? They're both going up together. The future expected price is going up and the demand is going up, right? And notice again this one's a little tricky because we are talking about prices of our product, but it is not a change in the price, right? Because the price didn't change. The price didn't change. It's only the expectations about the price that change. So again, we've got another little technicality here, but it's not the price changing. We're just expecting a different price in the future. Cool.

So here are some examples of things that could change consumer expectations. The first one here being inclement weather. So if there's going to be some sort of shortage of a product because of a hurricane or because there's been a dry spell or whatever, you could expect them to kind of panic and want to buy more of it now before there's some sort of shortage in the future, right? So that would increase the demand now. How about future income? So a lot of people count their eggs before they hatch, right? They're like "Hey, I'm getting a raise next year so maybe I could spend a little more now." Yeah, not the best logic, but it still holds true in practice. And another one here, just expected price changes in general. How about the release of a new iPhone? Right, so let's say you were about to go buy the latest iPhone 12 or whatever it is and you just heard that Apple is going to be putting out iPhone 13. Well then, if you really wanted an iPhone 12, you'll probably wait till iPhone 13 comes out because you're expecting the price of iPhone 12 to go down, so you'll wait and not demand an iPhone 12 today and get it once the price decreases. Alright, so let's go ahead and try an example here.

Consumer Expectations

Alright, so let's try this example here. As a hurricane approaches Brazil, fear of a shortage of coffee spreads. What happens to the demand for coffee beans? So hurricane, I don't even know if Brazil gets hurricanes, but you know whatever. The idea here is that consumers are going to be expecting the price to increase, right? Their fear of a shortage of coffee, they're expecting the future price of coffee to be higher, right? So we're going to say expected, I'll put "expected price up." That means the demand now is going to go up, right? People are going to want to buy it now because they're expecting it to be more expensive in the future. So, this is a good thing for our demand right because they want to buy more of it now, so we are going to shift it to the right. Cool. So, our demand curve moved from d1 here to d2. Price axis, quantity axis. Cool. So that's pretty simple, pretty straightforward one, just their expected future price increase, so they're gonna want to buy more of it now. Alright. Great. Let's move on.

Number of Consumers

Now let's see how the number of consumers in a market can affect demand. This one is pretty straightforward. If the amount of consumers in a market increases, then the demand for a good is going to increase as well, right? There are just more people who want to buy it, so the demand is going to increase. There are simply more people buying it. Here we see a directly proportional relationship as well. We've got the number of customers increasing and the demand also increasing. Here are some good examples of how the number of consumers could change:

• Immigration: If immigration is happening to our country, we're going to see a rise in our population, a rise in the number of consumers.
• Birth rate: If there's an increased birth rate, there are going to be more consumers, or a decreased birth rate, fewer consumers, right?
• Advertising: Advertising can target someone who is not a consumer of your product. They had no demand for your product, you advertise to them, and now they demand your product. So, advertising is another factor that could increase the number of consumers in a market.

Let's go ahead and do an example.

Number of Consumers

Alright. So let's check out this example. After Clutchtopia introduced its free pizza for everybody policy, immigration to the awesome country skyrocketed, doubling its population. What happens to the demand for bar soap in Clutchtopia? So it seems kind of random, but the idea here is there are more consumers, right? The population of Clutchtopia doubled, so you can imagine that people are going to be buying more bar soap just because there are more people there. So you're seeing the number of consumers increasing, therefore the demand is increasing. So there are more consumers, the demand is going to increase. Alright, so this was d one right here, our price and quantity axes in alphabetical order, and let's go ahead and shift this demand curve right. So which way are we going to shift? This was a good thing for bar soap, right. The number of consumers increased for bar soap, so it's a good thing for bar soap. Let's go ahead and draw this graph to the right. So we have shifted to the right here to demand 2, and you can see that we've moved to the right. Cool. Pretty easy, right? This one is easy. It's straightforward. The number of consumers goes up, the demand is going to go up. Alright. Cool. Let's move on.

Demand Shift Summary

Alright, so lastly I included this summary sheet that includes all the shifts in demand that we've covered so far, as well as information about changes in price. So first I listed all of the ones that are directly proportional. That means that the determinant is going to go up as well as the demand is going to go up, and it makes this neat little acronym here in spec. I know some of you do well with acronyms and stuff like that, so I included it in here although I would really think that it's better to focus on the logic and the intuition when it comes to deciding which way things are going to shift, but nonetheless, this could be helpful for you as well so I included it in here. So here we've got all our directly proportional shifts, income and normal goods right, so if consumer income rises, demand for normal goods rises. Substitute products, if the price of a substitute goes up, the demand for our good is going to go up. Preferences for a good, so if the preferences if consumers prefer this good for some reason, the demand for that good is going to increase. Consumer expectations, so if the expected future price in the consumer's mind is going to be higher, then they're going to demand the good now more. So you're going to see an increase in current demand there. And lastly, the number of consumers. So if you see the number of consumers in a market go up, you're also going to see the demand for that product go up. Next, let's cover these inversely proportional ones. We've got this one unfortunately there are only 2 so I couldn't really make an acronym here, but that's why there are only 2. It should be easy to remember. So we've got income with inferior goods, so when consumer income rises, demand for inferior goods is going to fall, right, and complements, when the price of a complement goes up, a complementary product, then the demand for our good is going to fall. And last, I wanted to include this note about changes in price. Remember when we have a change in price, it's only going to change the quantity demanded, right? We're not going to draw a new demand curve. I know you see 2 curves there foreshadowing a little bit, the other one's going to be the supply curve and we're going to get into that in a minute, but what you see here is that we've moved on the demand curve say from this point here in the middle, we've moved up to that other point. Okay, so we've only moved along the line and not drawn an entirely new demand curve. Alright, cool. So I hope this sheet is really valuable to you and I think you should use it especially while you're still getting comfortable with the shifts, while you're doing practice problems, try and use this sheet to help you guide, to the correct answers. Cool? Alright, one more thing. You see all this empty space here on the right side of the page? I wonder what's going to fill that up later. We'll have to see. Alright. Let's go.

What happens in the market for blenders if consumers decide that juicing their vegetables is better than blending their vegetables?

• A. Demand shifts to the left
• B. Demand shifts to the right
• C. Supply shifts to the left
• D. Supply shifts to the right

What happens in the market for beef jerky if customers expect a price increase in the future?

• A. Demand shifts to the left
• B. Demand shifts to the right
• C. Supply shifts to the left
• D. Supply shifts to the right

If cheese in a can is an inferior good, what happens to its market when consumer income increases?

• A. Demand shifts to the left
• B. Demand shifts to the right
• C. Supply shifts to the left
• D. Supply shifts to the right

Here’s what students ask on this topic:

What factors can cause a shift in the demand curve?

Several factors can cause a shift in the demand curve, including changes in consumer income, preferences, the number of consumers, prices of related goods (substitutes and complements), and consumer expectations about future prices. For instance, an increase in consumer income typically raises demand for normal goods while decreasing demand for inferior goods. Changes in preferences, such as a trend towards fitness, can increase demand for fitness-related products. The number of consumers can also affect demand; more consumers generally increase demand. Additionally, if consumers expect prices to rise in the future, they may increase their current demand.

How does a change in consumer income affect the demand for normal and inferior goods?

A change in consumer income affects the demand for normal and inferior goods differently. When consumer income increases, the demand for normal goods, such as organic food and new furniture, typically increases because consumers can afford to buy more. Conversely, the demand for inferior goods, like canned soup and used furniture, decreases as consumers opt for higher-quality alternatives. Conversely, when consumer income decreases, the demand for normal goods falls, and the demand for inferior goods rises as consumers look for cheaper options.

What is the difference between a shift in the demand curve and a movement along the demand curve?

A shift in the demand curve occurs when a non-price determinant of demand changes, such as consumer income, preferences, or the prices of related goods. This results in a new demand curve being drawn. For example, if consumer preferences for a product increase, the demand curve shifts to the right. A movement along the demand curve, however, occurs due to a change in the price of the good itself, leading to a change in the quantity demanded. For instance, if the price of a good decreases, the quantity demanded increases, resulting in a movement along the existing demand curve.

How do substitute goods affect the demand for a product?

Substitute goods affect the demand for a product by providing alternative options for consumers. When the price of a substitute good (Good X) increases, the demand for the related good (Good Y) also increases because consumers switch to the cheaper alternative. For example, if the price of Coke rises, the demand for Pepsi may increase as consumers opt for the less expensive option. This relationship is directly proportional, meaning that as the price of Good X goes up, the demand for Good Y also goes up, and vice versa.

How do complementary goods affect the demand for a product?

Complementary goods are products that are typically used together, such as peanut butter and jelly. When the price of one complementary good (Good X) increases, the demand for the related good (Good Y) decreases because consumers are less likely to buy both products together. For example, if the price of peanut butter rises, the demand for jelly may decrease as consumers decide not to buy peanut butter and, consequently, jelly. This relationship is inversely proportional, meaning that as the price of Good X goes up, the demand for Good Y goes down, and vice versa.

How do consumer expectations about future prices influence current demand?

Consumer expectations about future prices can significantly influence current demand. If consumers expect prices to increase in the future, they are likely to buy more of the product now to avoid paying higher prices later. This results in an increase in current demand. Conversely, if consumers expect prices to decrease in the future, they may delay their purchases, leading to a decrease in current demand. For example, if consumers expect a new model of a smartphone to be released soon, they might wait to buy the current model at a lower price, reducing current demand.