Transcript Law of Demand

Law of Demand
Law of Demand
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Demand
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The desire to own something and the ability to
pay for it.
Law of Demand
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Consumers buy more of a good when its price
decreases and less when its price increases.
Prices of a good will influence your decision to
buy it.
Law of Demand
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Law of demand can only work in a market
economy
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Must be choices
When choosing you must consider two things
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Substitution effect and income effect
Law of Demand
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Substitution effect
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When consumers react to an increase on a good’s price by
consuming less of that good and more of other goods.
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Income effect
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The change in consumption resulting from a change in
real income
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Ex.- McDonalds raise prices, more people buy Burger King
When prices rise, you can’t buy as many goods
Chart on pg. 80
Law of Demand
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Demand Schedule
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Demand curve
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A table that lists the quantity of a good a person
will buy at each different price
A graph that shows the demand schedule
Both show the relationship between a price of
a good and the quantity that someone will
purchase it at.
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Does not show outside factors
Law of Demand
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Create your own business
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Come up with an idea for a business and include
the following
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Demand schedule and curve (5 prices)
Describe the substitute and income effect of your
business
Describe 2 outside factors that might effect the sales
of your business (positively or negatively)