Transcript Demand
Lesson objectives • Understand what we mean by a market • Understand demand • Understand the relationship between price and quantity demanded Market • Where or when buyers and sellers meet to trade or exchange products Sub-market • A recognised or distinguishable part of a market. • Also known as a market segment Demand • The quantity of a product that consumers are willing to purchase at various prices over a period of time Demand • Notional demand = desire for a product • Effective demand = the willingness and ability to buy a product Ceteris Paribus • “Other things remaining equal” • If other variables remain unchanged • i.e. changes in quantity demanded are due to changes in the price of the product alone Relationship between price & quantity demanded • There is an inverse relationship between the price of a product and the quantity demanded • The lower the price, the more that will be demanded • The higher the price, the less that will be demanded • Assume consumers are rational Demand curve • This shows the relationship between the quantity demanded and the price of a product • Demand schedule = the data that is used to draw the demand curve for a product Demand schedule for a one-week selfcatering holiday in Ibiza in June Price per person (£) Quantity demanded 500 300 450 500 400 650 350 800 300 1,000 250 1,150 200 1,300 150 1,500 Describe the relationship Describe the relationship • There is the normal inverse relationship between price & quantity demanded • The relationship is linear - the market demand curve is a straight line • Relationship only applies for holidays taken in June • The curve can be used to extrapolate the expected quantity demanded at a particular price Movements along the demand curve • This is in response to a change in the price of a product • If movement is outwards = extension in demand • If movement is inwards = contraction of demand Consumer surplus • The extra amount that a consumer is willing to pay for a product above the price that is actually paid Calculations • Data drawn from a market or individual demand curve can be used to calculate the total expenditure made by the consumer • This is the total revenue (or sales) of the producer • Total expenditure = price x quantity demanded Ibiza demand schedule • What is the total revenue at £300 per week? • What is the total revenue at £325 per week? What other factors affect demand? What have we learned today? • • • • • • • Market Sub-market Demand Notional demand Effective demand Ceteris paribus Demand curve