11-Sep-15

In last chapter we have learnt that changes in price

will causes in Demand

Unit - 6
Changes in Demand

Price

Price

is not the only influence on

demand .

P1
P
S
Q Q1

Quantity
Supplied

(a)extension in supply

Causes of Changes in Demand

Changes in demand: shifts in the demand curve.

An increase in demand: a rise in demand
at any given price causing the demand
curve to shift to the right.
A decrease in demand: a fall in demand
at any given price, causing the demand
curve to shift to the left.

Price
D3

Income after income tax and national insurance contributions

have been deducted.

Demand
In terms of normal goods

Quantity
Supplied

Normal goods

1. Changes in disposable income

Income
22,00,000
(-)income tax
50,000
(-) national insurance 25,000
21,25,000

1)Changes in disposable income,

2)Changes in the price of related
products,
3)Advertising campaigns,
4)Changes in population and
5)Changes in taste and fashion
6)Some other factors

D1

Demand

a product whose demand increases when income increases and

decreases when income falls

Inferior good
a product whose demand decreases when income increases and
increases when income falls.

In terms of Inferior goods

11-Sep-15

CW
In China, urban incomes rose by more than 13% in 2005. This
contributed to a rise in demand for mobile phones, making China the
world's largest mobile phone market, with approximately 260 million
handsets.

2) Changes In the price of related products

An increase in demand can be caused by a rise in the price of
a substitute product.

a) illustrate the change in demand for mobile phones in China on a

diagram.
b. Is a mobile phone a normal or an inferior good? Explain your answer.

be used in place of
another

Demand will also

increase if the price
of a complement
falls.

conjunction with
another product

3) Advertising
CW
Decide whether each of the following is a substitute or a
complement
to a Volkswagen car;
a. Public transport
b. Petrol
c. Ford car.

4) Changes in population

A successful advertising campaign will increase demand for a

product.
It may bring the product to the notice of some new consumers
May encourage some existing consumers to purchase more
quantities of the product.

Ex. Fall in birth rate demand for toys will

Increase in Population Increase in demand.

Population of certain age impact on certain product
Ex. Ageing people demand for wheel chair will

Birth Rate =

Total Birth in a year

Total Population

X 1000

Solve it - In 2007, there were 3,250 births in a city with

population of 223,000.

11-Sep-15

6) Weather condition-

5) Changes in taste and fashion

Taste Increase Demand Increase

Food, Clothes, Entertainment

Ex. Footballs interest Football Shirt demand

7) Expectation about Future price:

8) Special Event

Bangladesh <-> India

Gov. relation is not friendly as before.

Before Eid Demand of Girl

Some anticipated that price of rice will increase

So some people are purchasing more,
So it will create the demand more,

CW
Youngsters throughout the world are turning away from buying newspapers to new
forms of media for their information and entertainment. For instance, in the UK, in
1973, 80% of 15 - 24 year olds read a (paid for) national newspaper. By 2005, this
percentage had fallen to 46%. A study carried out by News International in 2004 found
a number of reasons for this trend. These include young people having less time, less
need, less interest and less opportunity to buy newspapers and declining importance
of newspapers for youngsters. There are now many rivals to newspapers including
television, radio and the internet. The youngsters who do buy newspapers tell the
researchers that they read them more for entertainment than news.
a. What percentage of 15-24 year olds did not read a 'paid for' national newspaper in
2005?
b. Explain two reasons why young people throughout-the world are demanding fewer
newspapers.
c. Does the extract suggest that internet is a substitute for or a complement to
newspapers? Explain your answer.
d. Discuss two ways through which newspaper publishers could raise demand for their
newspapers.

Effect of Change in demandChanges in demand will cause

a change in price and a
movement along the supply
curve, (fig) shows the effect of
an increase in demand.
Initially there is a shortage of xy.
This shortage forces the price to
move up.

Price

D1
S
y

Quantity
Supplied

11-Sep-15

Effect of Change in demandThe higher price encourages

an extension in supply until a
new equilibrium price of P1 is
reached.
At this price, demand and
supply are again equal.

Effect of Change in demand-

Price

P1
P

In contrast a decrease in demand will

cause a fall in price and a contraction in
supply. (Fig) shows demand decreasing
from D to D1.
With lower demand, there will be a surplus
of unsold products at the initial price of P.

D1
S
y

Q Q1

Quantity
Supplied

S
x

Quantity
Supplied

HW

Effect of Change in demandThis surplus pushes down the price. As a

result supply contracts until the new
equilibrium price of P1 and a new quantity
of Q1 are reached.

Price D
D1

Price D
D1
P
P1

1) Use a demand and supply diagram to illustrate the effect of the following
events on the market for economics books in Bangladesh:
a. a successful advertising campaign run in the country by publishers of
economics books,
b. a decrease in the number of students studying economics.

S
x

Q1 Q

Quantity
Supplied

2) Decide in each case, whether the following would cause an extension in

demand, a contraction in demand, an increase in demand or a decrease
in demand for Meat in a country:
a. a rise in the price of Meat
b. a report that eating Meat reduces heart diseases
c. a rise in the price of Fish
d. a fall in the price of chicken.

Thanks for
being with
me