18. SHIFTS IN THE DEMAND CURVE Tastes Income Number of buyers Expectations Prices of related goods ♥ Shift factors of demand are factors that cause shifts in the demand curve
21. D 1 D 2 P QD 1 QD 2 Change in Income [Normal-Direct; Inferior-Inverse] More income results in more demand for new cars; less demand for used cars. New Cars Used Cars Less income results in more demand for used cars; less demand for new cars.
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24. Complement [ Inverse ] Substitute [ Direct ] Milk Cereal Pop Tarts D 1 D 2 P P 1 QD 1 P 2 D 1 D 2 D P Prices of Related Goods [Substitutes-Direct; Complements-Inverse] QD 2
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26. D 1 D 2 P QD 1 QD 2 "Change in Taste" [Direct] An increase in taste for DVDs results in an increase in demand . A decrease in taste for videos results in a decrease in demand . D 3 QD 3
27. D 1 D 2 P QD 1 QD 2 Expectations [of consumers] [about future price, availibility, & income] iPhone $399 Buy it now to save money.
28. D 1 D 2 P QD 1 QD 2 Expectations [of consumers] [about future availibility of toilet tissue] If there is expected to be a major shortage of toilet tissue , then consumers will stock up now or risk not getting any.
29. D 1 D 2 P QD 1 QD 2 Expectations [of consumers] [about future income] Let’s say that we are coming out of recession & consumers feel secure about their jobs. [ Positive future income ]
30. D 1 D 2 P QD 1 QD 2 Expectations [of consumers] [about future income] Let’s say that we are going into a recession and consumers don’t feel secure about their jobs. [ Negative future income ]
31. D 1 D 2 P QD 1 QD 2 Change in Market Size [Direct] [Number of Consumers] More demand for both normal & inferior goods New Cars Used Cars
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33. $20 $15 $10 $5 10 20 30 40 A B A change in price causes a change in the quantity demanded D P Q 50
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36. A Change in Demand Versus a Change in Quantity Demanded To summarize : Change in price of a good or service leads to Change in quantity demanded ( Movement along the curve ). Change in income, preferences, or prices of other goods or services leads to Change in demand ( Shift of curve ).
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55. (i) Inelastic demand (Ed<1) Assume price increases from RM10 to RM15 Price (RM) Quantity (units) 8 10 10 15 Steep line demand curve TR before = RM10 x 10 = RM100 TR after = RM15 x 8 = RM120 (TR increases) # If demand is inelastic, an increase in price will lead to an increase total revenue & vice versa
56. ii) Elastic demand (Ed>1) Assume that price increases from Rm10 to RM11 Smooth line demand curve P Q 7 10 10 11 TR before = RM10 x 10 = RM100 TR after = RM11 x 7 = RM77 (TR decreases) # If demand is elastic, an increase in price will lead to a decrease in total revenue.
57. iii) Unitary elastic demand (Ed=1) Assume that price increases from RM10 to RM20 20 10 10 20 P Q TR before = RM10 x 20 = RM200 TR after = RM20 x 10 = RM200 (TR remains the same) # If demand is unitary elastic, an increase in price will make total revenue remains the same Hyperbola line dd curve
58. The R/ship between TR & Price Elasticity of Demand when Price Increases Elasticity Coefficient Price Elasticity of Demand Price Quantity Demanded Total Revenue Ed>1 Elastic Increases Decreases more than proportionate Decreases Ed=1 Unitary elastic Increases Decreases in exact proportion Remain the same Ed<1 Inelastic Increases Decreases less than proportionate Increases
59. The R/ship between TR & Price Elasticity of Demand when Price Decreases Elasticity Coefficient Price Elasticity of Demand Price Quantity Demanded Total Revenue Ed>1 Elastic Decreases Increases more than proportionate Increases Ed=1 Unitary elastic Decreases Increases in exact proportion Remain the same Ed<1 Inelastic Decreases Increases less than proportionate Decreases
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