Examples of Change in Demand: What Causes Market Shifts?

📚 Quick Study Guide

• 📈 An increase in demand shifts the demand curve to the right, leading to higher prices and quantities.
• 📉 A decrease in demand shifts the demand curve to the left, leading to lower prices and quantities.
• Factors Causing Shifts in Demand:
  • 🙋 Consumer tastes and preferences: Changes in what people like.
  • 💰 Consumer income: More money usually means more demand (for normal goods).
  • 🛒 Prices of related goods: Substitutes (like Coke vs. Pepsi) and complements (like coffee and sugar).
  • 🔭 Consumer expectations: What people think will happen in the future.
  • 👥 Number of buyers: More buyers, more demand!
• 💡 Remember the basic demand equation: $Q_d = f(P, I, P_{rg}, T, E, N)$, where:
  • $Q_d$ = Quantity demanded
  • $P$ = Price
  • $I$ = Income
  • $P_{rg}$ = Price of related goods
  • $T$ = Tastes
  • $E$ = Expectations
  • $N$ = Number of buyers

Practice Quiz

1. Which of the following would cause an increase in the demand for ice cream?
   1. A) A decrease in the price of ice cream cones.
   2. B) A news report saying ice cream is unhealthy.
   3. C) A heatwave during the summer.
   4. D) An increase in the price of frozen yogurt.
2. What happens to the demand for coffee if the price of sugar (a complement) increases?
   1. A) Demand for coffee increases.
   2. B) Demand for coffee decreases.
   3. C) Demand for coffee stays the same.
   4. D) The supply of coffee decreases.
3. If consumers expect the price of gasoline to rise next week, what will happen to the demand for gasoline this week?
   1. A) Demand will decrease.
   2. B) Demand will increase.
   3. C) Demand will stay the same.
   4. D) The supply will increase.
4. Which of the following is NOT a factor that shifts the demand curve?
   1. A) Changes in consumer income.
   2. B) Changes in the price of the product itself.
   3. C) Changes in consumer tastes.
   4. D) Changes in the number of buyers.
5. What happens to the demand for a normal good if consumer income decreases?
   1. A) Demand increases.
   2. B) Demand decreases.
   3. C) Demand stays the same.
   4. D) The supply decreases.
6. An increase in the number of people moving into a city will likely lead to:
   1. A) A decrease in the demand for housing.
   2. B) An increase in the demand for housing.
   3. C) No change in the demand for housing.
   4. D) A decrease in the supply of housing.
7. If a new study shows that eating chocolate improves memory, what is likely to happen to the demand for chocolate?
   1. A) Demand will decrease.
   2. B) Demand will increase.
   3. C) Demand will stay the same.
   4. D) The supply will decrease.