Causes of Increase in Demand

  1. Increase in income for a normal good

  2. Increase in price of related good for substitutes

  3. Decrease in price of related goods for complements

  4. Favorable taste/preference

  5. Expected increase in price of the good

  6. Expected increase in income

  7. Decrease in income for inferior good

  8. Increase in number of buyers

Active Learning 1: The demand curve

Draw the demand curve for orange juice D1 and a point A (P1, Q1) on the demand curve. What happens in each of the following scenarios? Why?

A. The price of the apple juice increases

B. The price of orange juice falls

C. Consumer’s income falls (and orange juice is a normal good.

Supply

  • Quantity Supplied: Amount that sellers are willing and able to sell.

  • What is the Law of Supply?

Causes of Increase in Supply

  1. Decrease in input prices

  2. Decrease in price and related good for substitutes in production

  3. Increase in price and related goods for complements in production

  4. Improvement in technology

  5. Expected decrease in price of the good

  6. Increase in number of sellers