Figure 2-9 (continued)Each graph represents a headline that has something to do with the market demand for hot dogs:
■ Graph A:The demand curve shifts to the right because of taste or preference. The headline reads “Teenagers like
hot dogs.”
■ Graph B:The demand curve shifts to the left because the complementary product (hot dog buns) went up in
price; therefore, the demand for hot dogs will decrease. Anytime the complement’s price rises (or falls), the
demand for the actual product will decrease (or increase).
■ Graph C:The demand curve shifts to the left because hamburgers become a substitution for hot dogs. Whenever
a closely related product increases or decreases in price, it has a direct effect on the demand for the actual prod-
uct, in this case, hot dogs. This is an example of the substitution effect.
■ Graph D:There is no shift in the demand curve because price does not affect demand. Remember, we are talking
about the market demand for hot dogs. If the price for the actual product goes up or down, the only aspect that
changes is quantity demanded, not demand.
■ Graph E:The demand curve for hot dogs shifts to the right because of taste or preference. People are going to
prefer (generally) the hot dogs over the hamburgers.
■ Graph F:The demand curve for hot dogs shifts to the right because of the substitution effect. More people will
substitute hot dogs for tacos because of the price of tacos.In economics, we tend to generalize rational behavior. There is no force saying that you have to like hot dogs more than
hamburgers, or vice versa. This was a simple example of how demand can change because of the power of choice. Each
determinant results for the core value of choices: tastes/preferences, substitutions, complements, income, population,
and expectations are all rooted in your ability to choose. Regardless of your tendencies toward food, when you choose
you are creating an increase or a decrease in demand.
To become better acquainted with shifts in supply, read the following headlines (Figure 2-10) and determine if there is
a shift or just a change in quantity supply. The headlines are based on the market supply for hairspray. Illustrate a shift
and be sure to explain which determinant caused that shift.
SDThe Price Of Tacos Goes Up.S F.DHotdogs Are Found To Be
Healthier Than Hamburgers.E.Part I: The Fundamentals