Transcript Demand - TeacherWeb

Do First!
What if the price of
gas went up today to
$10 a gallon. What
problems do you
think we would see in
the country? How do
you think this would
affect you personally?
Markets
• A Market is any place where people come
together to buy and sell goods and services.
– Examples: Housing Market, Job Market, Shoe
Market
A market has 2 sides
A buying side
• Demand is the buying side
of the Market
I want to buy
lots and lots
of Doritos!
A selling side
• Supply is the selling side of
the market
I’ll sell you some Doritos. How
many do you want?
Demand
We all want
Doritos, and
we’re willing
to buy them!
• The willingness and ability of
a household to purchase a
good a various price levels
– More than just “wants”
• People have unlimited wants
• In economics , we focus on
“market demand” not
“individual demand”
– Market demand = the sum of
all the individual demands for
a particular good or service
Examples
Example: Mary really wants a new car, but she
doesn’t have the $34,000 needed to buy the
specific one she wants. If she did have the
money though, she says that she certainly
would buy the car.
Does Mary have willingness (wants it) and
ability (afford it?).
DEMAND?
Examples
Example: Amy is shopping for a new cell phone.
The one she likes is $129, which is within her
price range. She was worried she wouldn’t
have enough money, but she saved up and has
just enough for the phone.
Does Amy have willingness (she wants it) and
ability (She can afford it)?
DEMAND?
Law of Demand
• As the price of a good increases , quantity
demanded of the good decreases
And the other way around is also true...
• As the price of a good decreases , quantity
demanded of the good increases
Quantity Demanded
Quantity Demanded (Qd) refers to the number
of units of a good purchased at a specific
price.
I’ll have 8 bags of
Doritos, please
Demand problems
Example: What happens to apples if the price
drops from $1.50 to $0.99?
• Answer: The Quantity Demanded Increases
Example: What happens to bananas if the price
increases from $1 to $2?
• Answer: The Quantity Demanded Decreases
You Practice
Look back at the definition/examples of markets. List
three other examples of markets that we did not list
above
Look back at the conditions needed to be in demand for
a good. A) List 2 products that you are in demand for
and explain why. B) List 2 products that you are not in
the demand for and explain why.
Law of Demand
Law of Demand - As the price of a good
increases, the quantity demand decreases
In Symbols:
P
Qd and P
Qd
Demand Schedule Example
At $4, Tim
would by 1 ice
cream cone. At $3,
he would buy 2 ice
cream cones. At $2,
he would buy 3 ice
cream cones, and at
$1, he would buy 4
ice cream cones.
Price
Quantity
4
1
3
2
2
3
1
4
Graphing Demand
• A. Label “Price” on the
Vertical (Y) Axis
• B. Label “Quantity” on
the Horizontal (X) Axis
• C. Label the numbers on X
and Y axes
• D. Plot each point by Price
and Quantity
• E. Connect the Dots and
label your Demand Curve
“D1”
Price
Quantity
4
1
3
2
2
3
1
4
Graph of Demand Curve
5
Price
4
3
2
1
D1
1
2
3
4
5
Quantity
Graphing Practice
• You will create your own Demand Schedule
and Graph for a product of your choice
Ex: Shoes, Books, Magazines, Food, Soda, Candy,
Jeans, Gators jerseys, etc.
Individual vs Market Demand
You just plotted an individual’s (your) demand for a product.
To analyze how markets work, we need to determine the
market demand
Individual to Market Demand
What is your demand for a slice of pizza at the following prices:
Price
$ 0.00
$ 0. 50
$ 1.00
$ 1.50
$ 2.00
$ 2.50
$ 3.00
# of Slices
Individual to Market Demand
At each price, add up each of the quantities demanded
by people at your table.
Create a demand schedule for your table’s market demand.
Graph the “market demand” of your table, making sure to
label both axes, the scales, and D1
Shifts
Demand is not always stable
If something happens to change the quantity demanded
at EVERY price, the whole curve shifts
What shifts the whole demand curve?
• Changes in:
• Income
– Normal Goods
– Inferior Goods
• Prices of Related Goods
– Substitutes
– Compliments
• Tastes
• Expectations
Normal and Inferior Goods
• Normal good- A good for which an increase in
income leads to an increase in demand
– Ex: If we all have more income, we’d be willing to
buy more ice cream at any price than we did
before
• Inferior good- An increase in income leads to
a decrease in demand
– Ex: As income falls, you are more likely to take
public transportation than drive, so demand for
public transport rises as income falls
Related Goods
• Substitutes: An increase in the price of one
good leads to the increase in demand of the
other
– Ex: An increase in the price of ice cream would
lead to greater demand for other dessert
– Ex: An increase in the price of gasoline would lead
to greater demand for other kinds of energy
Related Goods
• Compliments: An increase in the price of one
leads to a decrease in the demand for the
other
– Ex: An increase in the price of peanut butter might
lead to a decrease in the demand for jelly
– Ex: An increase in price of gas might lead to a
decrease in the demand for cars (that run on gas)
Shifting demand curves!
• What do you think would happen to the demand
curve for popsicles if there were a heat wave?
– Demand curve would shift out (right)
• What if the price of popsicles went up?
– No shift: only movement along the curve
• What if popsicles were declared hazardous to your
health by the American Medical Association?
– Demand curve would shift in (left)
What makes the curve shift?
• Any time a
“determinant” (income,
prices of related goods,
tastes, etc.) of demand
changes, there is a shift
in the curve.
• If price for a good
changes, then there is
no shift – only a
movement along the
curve