Lecture 3: Demand Curves for Strawberries

Overview

• Introduction to demand curves in the context of strawberries market.
• Focus on the relationship between price and quantity demanded.
• Use of XY space to illustrate concepts, with price on the Y-axis and quantity on the X-axis.

Key Concepts

Inverse Relationship

• Generally, there is an inverse relationship between the price and quantity demanded.
  • Higher price leads to decreased demand.
  • Lower price leads to increased demand.
• Movement along the demand curve:
  • Price increase causes contraction of demand.
  • Price decrease causes expansion of demand.

Change in Price vs. Change in Demand

• Movement Along Demand Curve: Occurs when the price of strawberries changes.
• Shift in Demand Curve: Occurs when other factors change, affecting demand.
  • Outward Shift: Increase in demand at the same price.
  • Inward Shift: Decrease in demand at the same price.

Factors Affecting Demand Shifts

• Price of Substitutes: Increase leads to outward shift (e.g., higher cherry prices may increase strawberry demand).
• Price of Complements: Increase leads to inward shift (e.g., higher ice cream prices may decrease strawberry demand).
• Disposable Income Changes: Real income decrease leads to inward shift.
• Advertising: Successful promotion leads to outward shift.
• Product Price Promotions: Lower price leads to movement along the curve, not a shift.

Non-Linear Demand Curves

• Demand curves are typically drawn as linear for simplicity but are often non-linear in reality.
• Responsiveness to price changes can vary at different price points.
  • At lower prices, demand may be less sensitive.
  • At higher prices, demand may become more sensitive as consumers switch to alternatives.

Conclusion

• Exams: Typically depict demand curves as straight lines.
• Understanding: Real-world demand is nearly always non-linear.
• Preview of Next Video: Focus on supply curves for strawberries.