Business

Increase/Decrease in Quantity

Demand

Increase in Demand

Decrease in Demand

P

P

P

A

P1

B

D2

P2

Demand

Q

Q1 Q2

Movement Up/Down the Demand

Curve

Change in Price

1. Increase in Price causes a

decrease in quantity

demand.

2. Decrease in Price causes an

increase in quantity

demand.

D1

D1

D2

Q

Shift to the right of the Demand

Curve

Change in Factors Other Than Price

1. Increase in Taste increases

the demand curve.

2. Increase in population

increases the demand curve.

3. Increase in income in

income increases demand if

a normal good.

4. Decrease in income

increases demand if an

inferior good.

5. Increase in price of

substitute (pepsi) increases

demand for good (coke).

6. Decrease in price of

complement (beer)

increases demand for good

(pizza).

7. If I expect the price of the

product to increase in the

future, my demand today

will increase.

Q

Shift to the left of the Demand

Curve

Change in Factors Other Than Price

1. Decrease in Taste

decreases the demand

curve.

2. Decrease in population

decreases the demand

curve.

3. Increase in income

decreases demand if an

inferior good.

4. Decrease in income

decreases income if a

normal good.

5. Decrease in price of

substitute (pepsi) decreases

demand for good (coke).

6. Increase in price of

complement (beer)

decreases demand for good

(pizza).

7. If I expect the price of the

product to decrease in the

future, my demand today

will decrease.

Follow up questions: What happens to the demand for coffee if?

1.

2.

3.

4.

5.

6.

People start to going to Starbucks in droves.

The price of coffee mugs increases. Would this event affect other markets related to

coffee?

The price of tea decreases.

Your income increases. Assume that people will drink coffee no matter what their

income, but the type of coffee might change.

The price of coffee increases.

A civil war is expected to break out next week in Brazil, which will lead to...