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Chapter 4 Section 2
How are price and
demand related?
Factors Affecting Demand

Change in Quantity Demanded
Movement along the demand curve that shows a
change in the quantity of a product purchased
in response to a change in price
 Figure 4.3 on pg. 96


Income Effect

Change in quantity demanded because of a
change in price that alters consumers’ real
income

Substitution Effect


Change in the quantity demanded because of
the change in the relative price of the product
Change in Demand
Demand curve shifts itself to become a new
curve
 People are now willing to buy different amounts
of the product at the same prices
 Figure 4.4 on pg. 98
 Can change due to changes in income, tastes,
the prices of related goods, or number of
consumers


How can changes in income cause changes
in demand?


Income goes up…you can buy more
How can changes in other products cause
changes in demand
Substitutes—products used in place of other
products (margarine for butter)
 Complements—products that increase the use
of other products (computers and software)
