Transcript Demand 1 revised

Markets
Chapter 3-5
What is a market?
• markets are places where 1 or more
buyers and 1 or more sellers come
together
• ex: swap meet, stock market, grocery store, E-Bay
– good is a tangible item [product] that gives a
person utility or satisfaction
– service is an intangible item that gives a
person utility or satisfaction
utility = usefulness
pictures of markets
Markets have 2 parts
• Buyers provide the Demand
• Sellers provide the Supply
Demand
How much will you pay for my ipod?
(Reference 3.1)
What is demand?
• Demand- is the willingness and ability to
purchase a good or service.
– willingness to purchase refers to a person’s want or
desire for a good
– ability to purchase means having the money to pay
for the good.
• You may want something but may not
have the ability to pay for it.
• There is no demand unless BOTH
components are there.
wants ≠ demand
The Law of Demand
•
Law of Demand
– as the price (P) of a good increases, the quantity
demanded (QD) of the good decreases
– as the price of a good decreases, the quantity
demanded increases
•
Quantity Demanded (QD)
– the number of units of a good purchased at a
specific price
Inverse Relationship between P and QD
P
QD
P
QD
Why is this true?
Costs v. Benefits Analysis
• Costs Rise
– Price is one element of
cost
• Benefits stay the
same
Why is this true?
Law of Demand
• When price rises, quantity demanded falls
• When price falls, quantity demanded rises
Because . . .
…of the
Law of Diminishing Marginal Utility
Law of Diminishing Marginal Utility
utility = usefulness
A market can be described by
analyzing supply and demand
Economists like to use graphs to
represent changes in demand
Demand Schedule
a numerical chart that shows the law of demand
Price
Quantity Demanded
$4
$3
$2
$1
as price falls, demand increases
Check out what we did with the ipod…
1
2
3
4
Demand Curve
a graphic representation of the law of demand
Quantity
Demanded
$4
$3
$2
$1
1
2
3
4
Demand
5
4
Price
Price
3
2
1
0
1
2
3
4
Quantity Dem anded
Let’s convert the ipod demand schedule to a demand curve.
Conduct a poll of your classmates
in order to develop a demand
schedule and a demand curve
• Think of a product and a reasonable price range.
Ask at least 10 students at what price they would
be willing and able to buy that product.
Record the info in a demand schedule
Price
Quantity
demanded
Then plot the info on a graph
Homework:
*
• please read p. 68 “A Day at Disneyland…”
– “QtoA” Can you think of a good or service that is priced the way
visits to Disneyland are priced? (For two units of the good or
service, you pay less than double what you pay for one unit)
• Section Review (p. 70 ) - #5-7
This pricing illustrates Disneyland’s understanding of
the Law of Diminishing Marginal Utility
Homework:
*
• please read p. 68 “A Day at Disneyland…”
– “QtoA” Can you think of a good or service that is priced the way
visits to Disneyland are priced? (For two units of the good or
service, you pay less than double what you pay for one unit)
• Section Review (p. 70 ) - #5-7
This pricing illustrates Disneyland’s understanding of
the Law of Diminishing Marginal Utility
Shifts in Demand Curves
Reference 3.2
Shifts in Demand Curves
• Demand increases
DC shifts Right
• Demand decreases
DC shifts left
What causes demand curves to shift?
Now the ipod not only has all its
original features,but also has all the
answers to your homework in a
print format
• How will that change the demand curve?
• Can you predict other things that might
cause a demand curve to shift?
What causes demand curves to shift?
•
•
•
•
Preferences
Number of Buyers
Income
Price of Related Goods
Buyers demand more or less of a good at
all prices
Preferences
• Fads
• Styles Change
Number of Buyers
• Population Changes
– birth/death rate
– migration
Income may shift demand curve
(affects ability)
• If income increases and…
– More of a good is demanded: NORMAL GOOD
– Less of the good is demanded: INFERIOR GOOD
– Neither more or less of the good is demanded: NEUTRAL
GOOD
Price of Related Goods
• 2 types of related goods
– Substitutes
– Coke for Pepsi
» Price increase for Coke—demand increase for Pepsi
– Complements
– Peanut Butter and Jelly
» Price increase for pb—demand decrease for j
Caution!
Change of Demand (shift of demand curve)
IS NOT THE SAME AS
Change in Quantity Demanded
(change along the line-based only on change in price)
Homework:
• Complete “Cheezy Doodle” H/O
• Complete Section Review Qs #3-6 in
spiral
•
Fans often complain that athletes get paid too much money
and that these higher salaries lead to higher ticket prices.
Do you agree or disagree with this statement?
Do you agree or disagree with this statement?
–
•
•
•
Higher ticket prices lead to lower sales.
Why does this happen?
Why would they raise ticket prices?
If the Chargers sell 20,000 tickets at $25 and only sell
12,000 at $30, which ticket price brings in more total
revenue?
If players salaries go up from $300,000 to $325,000 per
game what price would Chargers sell tickets at? The
attendance numbers from above still apply.
What do you think might cause ticket prices to go up?