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REMEMBER


Think like a consumer!

If you demand something, then you:

Want it Can afford it Have a plan to buy it.

Demand Quantity Demanded


Wants are the unlimited desires or The of a good or service is the amount
wishes people have for goods and that consumers plan to buy during a
services particular time period, and at a particular
price.
So What Determines Buying Plans?
Price

Preferences Income

Expected Price of
Future Price Other Goods

Population
Let’s start with PRICE
Law of Demand
• When the price goes up, the quantity goes down.

Why

Substitution Effect
Income Effect

The term demand refers to the entire relationship between the price of the good and quantity demanded of the
good.
Demand Curve
• shows the relationship between the
quantity demanded of a good and its
price when all other influences on
consumers’ planned purchases
remain the same.

• Increasing the price from 1 to 1.5,


will decrease the quantity demanded
from 6 to 4.

• Moves along the Demand Curve


A change in Demand (5 reasons)
• A new Plan & A new Demand Curve

Income

Price of
Preferences
related Goods

Expected
Population
Future Price
TWO EXAMPLES
1. Income
• When income increases, consumers buy more of most goods and the
demand curve shifts rightward.

Normal Good Inferior Good

is a good for which demand is a good for which demand


increases as income increases decreases as income increases.
2. The Price of related goods (Substitute and
complement Goods)
substitute Goods complement Goods
a good that can be used in place of another good. is a good that is used in conjunction with another good.

Ex. Meat vs. chicken vs. Fish Ex. Printers and Ink
Pepsi and Coca-Cola

When the price of Pepsi Increases, the demand for Cola will
increase. (Substitute Good)
Graph it please!!!

When the price of Ink decreases, the demand for printers will
increases. (Complement Good)
Graph it please!!!

Do you remember Tea and Sugar example?


What would be the effect on your business (Cafe) if the price
of sugar increases from 5 to 10.. Will it affect the price of tea?
Graph it please
What is the difference between a change in
Demand and a change in Quantity Demanded?

When the price of the good changes and everything else When one of the other 5 factors that influence buying plans
remains the same, there is a change in the quantity changes, there is a change in demand and a shift of the demand
demanded and a movement along the demand curve. curve.
Summary
Variable Effect on Demand Demand Curve

1) Income Increases Increase Shift to right

2) Increasing Prices of related goods Substitute goods (increase) Shift to right


(Tea and sugar) (Pepsi and Cola) Complement goods (decrease) Shift to left
3) Price of a good is expected to Increase Shift to right
increase in the future

4) Population Increase Increase Shift to right

5) Preferences It depends It depends


Your assignment
Your task it to represent the following situation graphically. Please explain the
effect on quantity demanded or demand.
1. The price increased from P1 to P2, what is the effect on quantity demanded.
2. The price decreased from P2 to P1, what is the effect on quantity demanded.

The previous slide presents 5 scenarios. Reread them and answer the following
questions and represent your answer graphically.
Here you Go! ( 9 scenarios)
1. Your income increased from 1000 to 25000, what is the effect on
demand? Explain and graph the effect once on normal goods and
once on inferior goods
2. Your income decreased from 3000 to 950, what is the effect on
demand?
3. The price of sugar increased from 5 to 10, What would be the effect
on the demand of tea?
4. (You are Coca-cola company) and your competitor (Pepsi)
decreased the price of a can from 5 to 2.5, what is the effect on the
demand for cola?
5. The price of meat is expected to increase from 150 to 300 during festivals,
what is the effect on demand?
6. MacDonald's made a big advertising campaign and announced a new and
special taste that will affect the preferences of consumers, what is the effect on
demand?
7. Based on the bad experience of your best friend with (xyz restaurant), this
negative feedback affected your preferences and purchasing behavior negatively,
what is the effect on your demand of Xyz restaurant?
8. The size of population in a country has increased from 80 million to 150
million, what is the effect on demand?
9. After 10 years of a family planning program, the size of population decreased,
what is the effect on demand
Now you can take out your black glasses Ms./Mr. Consumer and get ready to put
on the red glasses and to be Ms./ Mr Producer

You can email me in case of any question


Office hours (if you need any help/question): From Sunday to Wednesday by
appointment (just send me an email)
Ahmed.Gamal.Nobel@Commerce.suez.edu.eg

See you next week 