ECONOMICS 113-LAW OF DEMAND

Non-price determinants of Demand

Non-Price Determinant of Possible Changes on the Non-price Determinant Effect on the Quantity Demanded
Demand
Income Increase in Income
Decrease in Income
Distribution of Income More towards the rich
More towards the poor
Population Increase in Birth rates
Decrease in Birth rates
Increase in Death rates
Decrease in Death rates
Increase in immigration rate
Decrease in immigration rate
Increase in emigration rate
Decrease in emigration rate
Taste and Preferences Favorable taste and preferences
Unfavorable taste and preferences
Consumer Expectations of Expected increase in future prices
future prices Expected decrease in future prices
Prices of related goods- Increase in the price of complement product
complement Decrease in the price of the complement product
Prices of related goods- Increase in the price of the substitute product
substitute Decrease in the price of the substitute product
Expectation of future Expected increase in future income
income Expected decrease in future income

1. Consider the demand schedule

Price (x) in Peso Quantity Demanded (Y)
0 500
5 475
10 450
15 425
20 400
2. Plot the schedule on a demand graph
3. Determine the equation of the Demand using
a. Algebraic Approach
b. Least Squares Method
4. Determine the slope
5. Interpret the slope
6. Answer the following questions:
1. What is the maximum quantity people would want for this product?
2. If the price increases to P22, what would be the quantity demanded by consumers?
3. If the quantity demanded at a particular time is only 360 units, what was the expected price of the commodity
during this time?
4. If the price is expected to increase by P3, what was the expected impact to the quantity demanded of the
product?
5. Suppose the quantity demanded decreased by 10 units, what was the corresponding change in the price?
ECONOMICS 113-LAW OF DEMAND

Consider the example below:

Price (x) Quantity Demanded(Y)
0 100
2 90
4 80
6 70
8 60
10 50

Requirements:
1. Plot the demand curve for this demand schedule
2. Determine the equation of the Demand
3. Determine the slope
4. Interpret the slope
5. Answer the questions that follow
a. If the price of the commodity in consideration rose to P12, what would be the expected quantity demanded?
b. If the quantity demanded at a particular time was 30 units, what would have been the price of the commodity?
c. Supposing the price was only p6.50, what would be the expected quantity to be demanded by consumers?
d. If the quantity demanded at a particular time was only 88 units, what would be the likely price of the
commodity?
e. If the price is expected to increase by P3 in the coming month, what would be the expected change in quantity
demanded of the commodity?