Factors Affecting Quantity Demanded by malj

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									  TEACHER NOTES                     BBI – Unit 1
                   Factors Affecting Quantity Demanded
  Price is not the only factor that affects quantity demanded for goods and

1. Price of            A good that can replace another        Coca Cola (P  D )
   Substitutes Goods   (ex. margarine for butter, pop for
                       juice OR Coca Cola for Pepsi)          Pepsi (D  )

2. Price of            Two goods used together                Gas price 
   Complementary       (ex. Film and camera, cars and gas,
   Goods               ketchup and hotdogs)                   demand for smaller
                                                              vehicles 

3. Consumer Income     More money consumers have to           Income  Luxury items
                       spend, the higher the demand for
                       goods and services                     Income  Luxury items

                       Inferior goods: goods you buy less
                       of when you have more money.

                       Ex. Steak verse hamburger

4. Taste and           Trends, fads, environment,             Doctors report apples
   preferences         advertising all affect demand          good for us …
                                                              Demand for apples 

5. Expectations        If people think prices will increase   Gas  tomorrow,
   about future        in the future, more goods will be in
   Prices              demand now                             Demand         today

6. Demography          Study of the population (size, age,    population
                       buying habit, etc…)
                                                              demand overall for
                       Businesses use demographics to         goods
                       make decisions (what to sell, price,
                       where to sell, when, etc..)
TEACHER NOTES                     BBI – Unit 1
                    Factors Affecting Quantity Supplied

Supplying goods and services can be affected by several factors other
than price.

1. Production Cost        Cost associated with    Wages ,
                          supplying goods or      cost of supply 
                          services                quantity supplied 
                                                  (unless price )
                          Ex. Rent, materials,

2. Change in              Advancement in          Technology 
   Technology             technology can create   costs 
                          efficiency of           quantity supplied

3. Owner’s Desire         Choice of the owner     Quantity

4. Weather conditions     Critical for agriculture Bad conditions
                                                    output price

                                                  good conditions
                                                  output price
TEACHER NOTES                   BBI – Unit 1

When Price is the changing factor movement occurs along the supply or
demand curve.

When factors other than Price change SHIFT in the supply or demand
curve occurs.
                 Illustration of Changes in Supply

Increase in Supply                                   Decrease in Supply

EP=   ↓                                        EP=   ↑

                 Illustration of Changes in Demand

Increase in Demand                             Decrease in Demand

EP=   ↑                                        EP=   ↓

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