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The Nature of Markets - Changes in Demand

Let's now take the game one step further.

Stage 4

1. It is now day three and the peanut crisis has eased. Snickers now cost 50p once more. Replace the £1 label in front of the Snickers bar with the 50p label.
2. The government has decided to provide all students with a grant (or Education Maintenance Allowance). As a result your income has increased and you now have £4 to spend.
3. Again, in your groups work out market demand by adding together each person's demand for each product. Print out and fill in the table below, following the example given.

What has happened to the level of demand for all the goods after incomes have risen? The chances are that demand for all the goods is greater than before. This helps us to make another important point.

Demand does not stay 'static' - it changes as a result of changes in the factors that affect demand. These are the changes that we identified earlier in the resource.

The animation below will help you to understand what is happening here.

Please note: to make full use of the activity, your system must have Macromedia Flash Player 6 (or higher) installed - this can be obtained from the Macromedia Web site. Interactive Macromedia Flash resources developed by Biz/ed are designed to work both with and without the use of a mouse and be compatible with as many assistive technologies as possible (further information on our accessibility features is available). If you cannot view the interactive resources for whatever reason a static annotated image will appear instead, if you cannot view the static image it will be replaced by some descriptive text.

If you move the slider to the right, the demand curve moves to the right. What happens to the amount demanded when you do this?

If you move the slider to the left, the demand curve moves to the left. What happens to the amount demanded now?

Notice that in each case the price is not changing. What is changing are the factors that affect demand and it affects how much we choose to buy of different goods.

In the case of our game, if we have a higher income it means we can afford to buy more Mars bars, more Snickers, more milk and more Coke. It could be that you really like Mars bars and spend all your extra money just on those as opposed to other goods! It is likely, however, that the market as a whole will react in a similar way so we can say that:

See if you can work out whether changes in the following factors cause a movement to the left (fall) in demand or a movement to the right (rise) in demand.

Please note: to make full use of the activity, your system must have Macromedia Flash Player 6 (or higher) installed - this can be obtained from the Macromedia Web site. Interactive Macromedia Flash resources developed by Biz/ed are designed to work both with and without the use of a mouse and be compatible with as many assistive technologies as possible (further information on our accessibility features is available). If you cannot view the interactive resources for whatever reason a static annotated image will appear instead, if you cannot view the static image it will be replaced by descriptive text.

To perform the drag and drop exercise using the keyboard tab to the list of items. Use l and r to move the items to the left and right containers respectively and tab to move to the next item. To mark the exercise press the return key and to reset the resource use the delete key.

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