Levels of income Population End market indicators Availability and price of substitute goods Tastes and preferences

Economic analysis has recognized the role of key variables in determining demand and consumption. In practice, the distinction between demand (as a schedule of quantities as a function of price, other factors held constant) and consumption as an equilibrium quantity at a given price, is frequently ignored. The development of "gap" type models illustrate the common approach of projecting 'demand' as a fixed quantity independent of price. Demand, as the relationship between price and quantity, is subject to change over time due to changes in the underlying factors held constant by the static notion of demand. Changes in demand "shifters" are often included in economic estimation of demand representing anticipated dynamics in these determinants.

Levels of income
A key determinant of demand is the level of income evident in the appropriate country or region under analysis. As a generality, the higher the level of aggregate and/or personal income the higher the demand for a typical commodity, including forest products. More of a good or service will be chosen at a given price where income is higher. Thus determinants of demand normally utilize some form of income measure, including Gross Domestic Product (GDP).

Population
Population is of course a key determinant of demand. Although all forest products do not necessarily enter final consumer markets, the actual markets are largely presumed to be functionally related to population. Growing populations are positively correlated to timber demands in the aggregate, as well as specifically to individual forest products. Frequently, population and income estimators are combined, as in the case of the use of Gross Domestic Product per capita.

End market indicators

The use of end market indicators as determinants of demand is frequently incorporated into demand analysis. For example, much of the final use of forest products is linked to construction (residential and total). Indicators and trends related to construction activities, or which are determinants of construction, provide indirect estimates of the influence of these activities as the source of derived demand for wood. Housing starts, public investments, interest rates, etc. can be highly correlated to timber demand.

Availability and price of substitute goods

Consumption choices related to timber are also influenced by the alternative options facing users in the relevant marketplace. The availability of potential substitute products, and their prices, weigh heavily in determining the elasticity of demand, both in the short run (static) sense and over time (long run). Fuelwood, as a dominant use of timber in the Asia Pacific Region, reflects conditions of very limited options for energy sources at 'reasonable' prices. Rural low income or subsistence populations simply do not have 'options' regarding energy - they use wood or go without. Demand, at this basic level, in almost perfectly inelastic. The cost (if only implicit in terms of gathering time) does not materially affect consumption quantity. Suitability of alternative goods and services is, in part, a question of knowledge as well as availability. Market information regarding alternative products, quality, convenience, and dependability all influence choices. Under conditions of increased scarcity and rising prices for tropical hardwood panels, for example, users have a positive incentive to search for and investigate the suitability of alternatives that were previously overlooked or ignored.

Tastes and preferences

All markets are shaped by collective and individual tastes and preferences. These patterns are partly shaped by culture and partly implanted by information and knowledge of products and services (including the influence of advertising). Different societies use forest products differently because of these differences in taste and preferences. For example, markets for wood products in Japan are commonly recognized as requiring very high product quality standards, the importance of visual attributes of wood, and other preferences not commonly found in many other markets.

What Do People Want to Wear?

The following link is to the student version of this lesson for students to follow online: http://econedlink.org/458

Lesson Details
Grades: 6-8, 9-12 Author: Mike Duckworth Posted: July 22, 2003

STANDARDS IN ECONOMICS

NATIONAL STANDARDS STATE STANDARDS

STANDARDS IN PERSONAL FINANCE

NATIONAL STANDARDS STATE STANDARDS

OPTIONS

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To stay in business, fashion merchandisers must be able to anticipate what consumers want. By looking at different retail websites, students will look to anticipate what consumers are demanding. Students will then go through the market scenarios for each product and try to anticipate the effect the scenario will have on the demand and price (assuming constant supply) for the product they have chosen.

KEY CONCEPTS
Demand, Equilibrium Price, Price, Quantity Demanded, Quantity Supplied, Supply

STUDENTS WILL

Analyze market scenarios to determine their effect on the demand and price for the identified product. Determine the relationship between a change in demand and a change in price.

INTRODUCTION
Purchasing agents work to identify market trends for retailers, trying to predict items that consumers will demand. In this lesson, the students take on the role of purchasing agents; as purchasing agents they try to anticipate the impact of certain market scenarios on the demand and price for clothing items they have selected. The lesson builds upon students' prior knowledge of determinants of demand and how they impact changes in that demand. The impact of interest is the effect on price. Make sure to tell students that market prices are set by the interaction of demand and supply (be aware that they should be more concerned with the marketing merchandise with short product life to a discriminating public). By trying to determine what is "hot" and what is "not", students will be learning about determinants of demand and ultimately, price. The determinants of demand for this lesson include: tastes and preferences, income (normal and inferior goods), price of related items, goods and compliments, future expectations, and number of consumers in the market.

RESOURCES

Reebok Footwear: Here is the homepage for Reebok Footwear. www.reebok.com/US/# Nike Sportswear: Here is the homepage for Nike Sportswear. www.nike.com/main.html Adidas Sportswear: Here is the homepage for Adidas Sportswear. www.adidas.com/ Ann Taylor Apparel: Here is the homepage for Ann Taylor Apparel. www.anntaylor.com/home.jsp Eddie Bauer Apparel: Here is the homepage for Eddie Bauer Apparel. www.eddiebauer.com/home.jsp Wet Seal Apparel: Here is the homepage for Wet Seal Apparel. www.wetseal.com/home.jsp

PROCESS
How do different market scenarios affect the demand and price for clothes? The students have a list of items to sell. The list includes these items: dress pants, winter coats, ski sweaters, and athletic shorts. The students will need to select examples of these products online. Potential web sites include but are not limited to the following:

Reebok Footwear Web site Nike Sportswear Web site Adidas Sportswear Web site Ann Taylor Apparel Web site Eddie Bauer Apparel Web site Wet Seal Apparel Web site

Remember, they want to enter a market in which there will be an increasing demand for the given product. Students should discover that changing the price point on a demand curve changes sales. This is a supply shift. Student will go to different web sites and identify different types of clothing listed above: dress pants, winter coats, ski sweaters and athletic shorts. Then they need to complete both interactive activities and print their responses. The responses can be used to assess

the students' learning. The students should use what they find on the Web site(s) to create the "market scenarios" that are described in the extension activity. Again, the determinants of demand for this lesson include: tastes and preferences, income (normal and inferior goods), price of related items, goods and compliments, future expectations, and number of consumers in the market. For the questions below, write what effect the above scenario has on the product and explain why.

1. Winter coat: Unusually mild winter?

2. Winter coat: Winter begins?

3. Winter coat: Relocate to southern California?

4. Winter coat: Rock stars make it trendy to wear winter coat?

5. Ski sweater: Skiing becomes more popular?

6. Ski sweater: Ski sweaters help increase weight loss?

7. Ski sweater: Unusually mild winter?

8. Ski sweater: Celebrity endorsements?

Email Results
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Print ResultsEmail ResultsNext Question Print all questions and answers 1. Winter Coat: Unsually mild winter? [An unusually mild winter would decrease demand and price for winter coats.] 2. Winter Coat: Winter begins? [Winter beginning would increase the demand and price for winter coats.] 3. Winter Coat: Relocate to Southern California? [Relocating to southern California would decrease the demand and price for winter coats.] 4. Winter Coat: Rock stars make it trendy to wear winter coats? [Rock stars making it trendy to wear winter coats would increase the demand and price of them.] 5. Ski sweater: Skiing becomes more popular? [Skiing becoming more popular would increase the demand and price for ski sweaters.] 6. Ski sweater: Ski sweaters help increase weight loss? [Ski sweaters helping increase weight loss would increase the demand and price for them.] 7. Ski sweater: Unusually mild winter? [An unusually mild winter would decrease the demand and price for a ski sweater.] 8. Ski sweater: Celebrity endorsements? [Celebrity endorsements on ski sweaters would increase the demand and price for them.] For the questions below, write what effect the above scenario has on the product and explain why.

1. Athletic Shorts: Famous people wear athletic shorts in public?

2. Athletic Shorts: Schools ban the wearing of athletic shorts?

3. Athletic Shorts: Working out becomes trendy?

4. Athletic Shorts: Unusually cool summer months?

5. Dress Slacks: The move to a more casual workplace?

6. Dress Slacks: Increase in per capita income?

7. Dress Slacks: Warmer weather?

8. Dress Slacks: Increase in employment in the professional sector?

Email Results
Fill in the blanks with your and your teacher's information. Then click the submit button to email your answers. Your Name

Your Teacher's Name

Your Teacher's Email

Print ResultsEmail ResultsNext Question Print all questions and answers 1. Athletic Shorts: Famous people wear athletic shorts in public? [Famous people wearing athletic shorts in public would increase the demand and price for them.] 2. Athletic Shorts: Schools ban the wearing of athletic shorts? [Schools banning the wearing of athletic shorts would decrease the demand and price for them.] 3. Athletic Shorts: Working out becomes trendy? [Working out becoming trendy would increase the demand and price for athletic shorts.] 4. Athletic Shorts: Unusually cool summer months? [An unusually cool summer would decrease the demand and price for athletic shorts.] 5. Dress Slacks: The move to a more casual workplace? [The move to a more casual workplace would decrease the demand and price of dress slacks.] 6. Dress Slacks: Increase in per capita income? [The increase in per capita income would increase the demand and price of dress slacks.]

7. Dress Slacks: Warmer weather? [Warmer weather would decrease the demand and price for dress slacks.] 8. Dress Slacks: Increase in employment in the professional sector? [An increase in employment in the professional sector would increase the demand and price for dress slacks.] Make sure to discuss the correct answers to the questions with the class after they have finished the activities.

CONCLUSION
Based on the information gathered in the market selected for online research, list the demand determinants that would currently affect it. Students should be prepared to answer these questions in a class discussion about demand and price.

What happens to price when demand increases? What happens to price when demand decreases? What type of relationship do you see between demand and price?

During this discussion, the students should recognize the direct relationship between price and quantity demanded when supply is constant. As demand increases, so does price. As demand decreases, so does price.

ASSESSMENT ACTIVITY
The printed answers to the market scenarios provide immediate assessment. Also, have the students answer these questions as they relate to the issues learned in the lesson. 1. Why do businesses advertise their products? [To increase the number of consumers in order to increase demand, or to increase people's taste for that good in order to increase demand.] 2. Why might you advise a business to have a sale? [A sale lowers the price. Price is not a determinant, but would change the quantity demanded.] 3. How do seasonal expectations influence demand and price? [Warm clothes demanded in cold times of the year; lighter clothes demanded in warmer times.] 4. In your work purchasing products, how might you be influenced by what you have learned? [Answers will vary.]

EXTENSION ACTIVITY
1. Have the students create their own market scenarios. Have them use their scenarios to quiz others in the class about the relationships they have been studying. If these markets are defined by listed internet sites, teachers can invite explanations of price differences

among brands of specific products. Encourage discussion of price similarities and reasons why tastes for some (such as running shoes) allow manufacturers of those products to extract premium prices. These web sites offer sufficiently broad examples of seasonal sales tactics by line of production. 2. For a quick evaluation activity, have each student use a note card with an arrow on it. After the students hear a report on a market scenario, they are to hold their cards so that the arrows point up or down, showing the predicted change in demand. This provides a basis for immediate feedback and discussion. 3. Encourage students to look at newspapers and find headlines that signal changes in demand. Teachers could provide news headline links or let the students search on their own. Housing, commodities, entertainment, and other markets also lend themselves to be analyzed in terms of changes in demand.

EDUCATOR REVIEWS

I thought this lesson was really interesting. Vivian Okere POSTED ON November 8, 2004

I think this is a very good activity and it helped me to understand when are the best times to get a product. Rae Jeanne Coran, Omaha, NE POSTED ON November 30, 2004

Great activity to understand the shift in demand plus a great way to look at actual situations. Maryann Haggerty, San Jose, CA POSTED ON April 17, 2005

Great activity to explain demand. My students enjoyed learning about demand in a fashion sense. Kristi S., Amory, MS POSTED ON October 28, 2008

This is a really good activity. It helps people to understand the affects of certain situation on sales people! Shante C., Knoxville, TN POSTED ON February 25, 2009

This was an easy assignment! Billy Bob, O'Fallon, MO POSTED ON March 6, 2009