Econ 100
Lecture 2.2
Consumer Demand Theory
Ceteris Paribus (cont’d)
10-7-2010
Overview
• Individual and Market Demand Curves
• Factors that Shift Demand Curves
• More useful websites
From the Demand Side
• First Law of Demand
– What Does Law Of Demand
Mean?
– all other factors being equal, as
the price of a good or service
increases, consumer demand for
the good will decrease and vice
versa.
– http://www.investopedia.com/ter
ms/l/lawofdemand.asp
Changes in Demand (cont’d)
Factors That Can Shift Demand
• Individual and Market Demand Curves
– Income
– Price of Substitutes
– Price of Compliments
– Product Quality
– Future Prices
– Taste and Preferences
• Market Demand Curves
– Population (market)
Market Demand:
Maybe a little bit different
• Market Demand may be kinked as new
buyers enter at different price points
When it’s only Tom – Tom’s D is the market
Harry joins the Market
Dick joins
Table 4.1
Factors That Shift the Demand
Curve
What We’ve Learned
• Buy rule for consumers (Qd: P=MV)
– Consumers will buy x units up to the point that price
equals MV for the last (xth) unit
• First law of demand: demand curves are downward sloping
• Negative slope  diminishing marginal value of consuming
next unit
An In Class Problem
Seattle Times Oct 3, 2007
Olympic National Park officials are suggesting raising the price of an entrance pass
for motorists — good for seven days — from $15 to $25 starting in 2009, with the
fee for individuals such as cyclists climbing from $5 to $12. Season passes would
increase from $30 to $50
But public response, particularly from tourist-dependent local businesses has been
generally negative said a spokeswoman for Olympic National Park.
1.
Illustrate the effect of the increase of the price for park passes on
the demand for trips to the park
2.
Illustrate how the park fee increase would affect the demand for
other tourist-related businesses, e.g., hotels, restaurants.
Useful Websites
– Understanding differences between factors
that cause shifts in demand or supply
• http://hspm.sph.sc.edu/COURSES/ECON/SD/SD.h
tml
– Basics of demand and supply
• http://www.investopedia.com/university/economics/
economics3.asp
– Cobweb theorem
• http://www.bized.co.uk/current/mind/2004_5/25100
4.ppt