Economics

JUAN DIEGO CABELLO

ECONOMIST

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Non-Price determinants of demand
Price is regarded as the key determinant of the level
demand, but it’s not the only one.

Higher levels of real income mean that

Income customers are able and willing to buy more
goods and services

Normal and inferior goods

List 3 normal goods and 3 inferior goods.

Explain why you consider them as normal or inferior goods.

Would you consider alcohol, tobacco and gambling as normal or inferior goods? Why?

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Non-Price determinants of demand
Tastes and preferences can change over time,
Tastes and
so demand increases or decreases to reflect
preferences
these changes

Fashionable and unfashionable

goods

List 3 goods you think are less fashionable than before .

Explain why you consider they’re less fashionable.

What do you think has happened to goods such as cigarettes and sugary drinks?

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Non-Price determinants of demand
If people expect that the value of a good or
Future price
service will increase in the foreseeable future,
expectations
they will demand more of it now.

Capital gain

Identify 3 assets from which you think you can generate capital gains.

Why are there more profitable assets than others?

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Non-Price determinants of demand
The price of related goods means that the
Price of related
sales of one product affect the demand of
goods
another product.

Complements or
complementary goods

These are products jointly demanded as they

go well together.

A change in the price of one product (such as

a games consoles) can negatively affect the
demand for the related good (videogames).

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Non-Price determinants of demand

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Non-Price determinants of demand
Substitutes

These are products that are in competitive

demand, they can be used as alternatives to
each other

An increase of the price of one product (such

as Coke), it increases the quantity demanded
of the other product (Pepsi).

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Non-Price determinants of demand

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Non-Price determinants of demand

Explain the likely relationship between the demand for private and
public transportation.

Distinguish between substitutes and complementary goods.

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Non-Price determinants of demand
A change in the total number of
Number of
consumers of a product causes the entire
consumers
demand curve to shift

More buyers or more

consumption

What other factors do you think influence

demand?

Choose a product or service and explain how you think

these 5 factors have changed in the last 3 years.

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Movements along the demand curve
Contraction in the quantity
An increase in price
demanded

Expansion or extension in
A decrease in price
the quantity demanded

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Shifts of the demand curve
Rightwards or outwards shift
An increase in demand
of the entire curve.

Caused by favourable changes in

non-price factors that affect
demand

In real life, these shifts will cause

the price to change

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Chapter 3 summary
Refers to the willingness and ability of
Demand customers to pay a given price to
purchase a good or service

The amount of a good or service demanded

at each price level Quantity demanded

States an inverse relationship between the

The law of demand price of a product and its quantity

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Chapter 3 summary
The sum of all individual demand for a
The market demand product at each level price

Related products, income, preferences and

tastes, expectations of future prices, and
Non-price determinants of
number of consumers demand

Movements along an existing demand

Price fluctuations curve.

A rise in prices cause a contraction in quantity demanded, a fall in

prices cause an expansion in the quantity demanded

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Chapter 3 summary
Change in non-price Shift (rightwards or leftwards) in
factors demand

More or less demand for the product at all

given prices Shifts of the demand curve

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