Changes in the Demand Curve

Why is the Demand Curve Downward Sloping?


The demand curve shows a
negative relationship between
the price of the good and the
quantity demanded.

Meaning, as prices of a
commodity declines, its
demand tends to increase.
The Substitution Effect

Describes the decision

of the consumer to
substitute an expensive
good with cheaper ones
when prices change.
Case Example:

Consumer A has a daily allowance of

P1,000.00. He is given a choice between
buying a grande sized Frappuccino @
P250.00 each or a grande sized matcha
flavored iced tea @ P200.00 each. If
Consumer A chooses to get the
Frappuccino, how many servings will he
get, and if he chooses the matcha iced tea,
how much more servings will he get
compared to the first item?
The Income Effect


A modification of the
consumption of the
commodity due to the
change in the purchasing
power of the consumer
resulting from a price
change.
Case Example


Kim recently got a salary
increase from P1,000 a day
to P1,500. Show a graph
reflecting the impact of this
increase in income on her
purchasing power.
Factors that Cause Changes in the
Demand Curve
Movement Along the Demand Curve

Refers to the change

in quantity demanded
resulting from the
change in the price of
the commodity.
Shifts in the Demand Curve


Are changes in the demand
curve caused by any of the
other factors besides the
price of the commodity, such
as tastes, prices of other
goods, income and other
factors.