Chapter 4 Demand
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Transcript Chapter 4 Demand
Economics Chapter 4
Demand
Demand
Demand is the desire, ability
and willingness of a consumer
to buy a product. A WANT
Microeconomics is the study of
the behavior of one consumer or
one business
Macroeconomics is the study of
the economy of the whole
country.
Demand Schedule
A demand schedule is a
listing that shows the
various quantities
(amounts) demanded
wants) of a product at all
prices you might see in the
market.
Demand schedule for
Snuggies
Price
$$
Qty.
Demanded
$50
$20
$15
$10
$5
0
5
10
27
47
(how many)
(wanted)
Demand Curve
A demand curve is a
graph showing the
quantity demanded at
each and every price
that you might see in
a market
Snapshot of RIGHT
NOW!
This demand curve goes
DOWN!
Movement on red line on demand curve means there has been
a change in PRICE ONLY. There is ONE curve (line)
Demand Curve
If $50, quantity demanded =__
If $30, quantity demanded =___
If $5, quantity demanded= ___
Law of Demand
The Law of Demand states that the
quantity demanded of a good or
service varies inversely with its price.
quantity
price demanded
quantity
price demanded
Cost and demand are
inversely proportional.
If price goes up, demand goes ______________.
If price goes down, demand goes _____________.
Market Demand Curve
A market demand curve shows
the quantity demanded by
everyone who is interested in
purchasing the product.
Example: buying a new laptop
Demand curve for Tiger Baseball Tickets…
If the tickets cost $25, then ________ people want it.
At $25, ___ people will demand (WANT) that quantity.
If the tickets costs $15, then ________ people want it.
At $15, ___ people will demand (WANT) that quantity.
If the tickets costs $30, then ________ people want it.
At $30, ___ people will demand (WANT) that quantity.
Marginal Utility
Marginal utility is the extra
enjoyment that a person gets
from getting one more!
YES! One more sucker!!!
Extra
lollipops bring
Erick extra
utility!
Diminishing Marginal Utility
The principle of diminishing
marginal utility means that the
enjoyment we get from more
decreases.
NOT ANOTHER HOT DOG!!!
Think of eating contests or
block days at KHS!
Section 2
Factors Affecting Demand
When there is a change in a people’s
willingness and ability to buy, it is because
of 2 reasons:
1. Change in QUANTITY DEMANDED
OR
2. CHANGE IN DEMAND
Change in Quantity Demanded
A change in quantity demanded is a
movement ALONG the demand curve
that shows ….
a change in the quantity of the product
purchased WHY?
change in PRICE.
Examples:
1. Income effect
2. Substitution
Income: $100 a week
Want gas for car
If gas price
the person buys
(more/less) gas?
If gas price
the person buys
(more/less) gas?
1. Income Effect
NO INCREASE IN YOUR INCOME ($ earned)…..
If price
then a person feels they can
buy more
If price
then a person feels they cannot
buy as much
If he has more money from winning the lottery, what will the effect be on his spending?
2. Substitution Effect
CD
The substitution effect is the change in quantity demanded
because of a change in the price of an item.
Example – Substituting a concert ticket for a CD
Will a person buy more CDs or concert tickets?
$12.99
Concert Ticket $34.75
Mississippi mud pie $3
Severn sludge souffle $5
Change in Demand- a SHIFT in Demand
A change in demand happens
because people are now willing to
buy different amounts of the product
at the same prices.
A CHANGE IN DEMAND WILL
RESULT IN A NEW DEMAND
CURVE. (oh shift!)
There are 2 lines.
Changes in Demand
Original:
price $10,……….Quantity demanded = _____
New Demand
price $10………..Quantity demanded = ______
2.
Consumer tastes
- preferences
1.
Consumer income –
$$$ earned
4.
Complements –
buns for hotdogs
PRICE????
NO NO NO
3. Substitutes–
Pepsi for Coke
What
Changes
Demand?
6. Change in
expectations
5. Change in the
number of customers
Consumer Income
Changes in consumer income
can cause a change in demand.
Example – you get a raise or
you lose your job
I can buy (more/less)
I can by (more/less)
Consumer Tastes
Consumers
do not always
want the
same thing.
Example –
change in
fashion, style,
the
development
of new
products
More on Changing Tastes…
Changing tastes
shift demand
curves (and can
actually be quite
amusing after a
few years!).
Substitutes
$2.75
$2.00
A change in
the price of
related
products can
cause a
change in
demand.
Substitutes
can be used
in place of
other
products.
Complements
Related goods are known as
complements because the use
of one increases the use of the
other.
With cereal, you must buy
______________.
Example – peanut butter and
jelly, hotdogs and hotdog buns
With a hot dog, you must buy
_________ and ____________.
Elasticity is the what
happens when a
dependent variable
such as quantity
responds to a change in
an independent
variable such as price.
IF
Independent variable $$$$
Elasticity
Pajama bottoms
THEN
If there is a change in
price $$$……
Then the
quantity
demanded
how much
want)changes
Independent variable: $
Dependent variable: what happens?
Dependent variable: qty.
Demand Elasticity
Demand Elasticity is how much a change
in price causes a change in the quantity
demand
ELASTIC
High pricelow price
Demand change- (quantity want)
big change
small change
little change
INELASTIC
High pricelow price
Demand change- (quantity want)
big change
small change
little change
Elastic
“Elastic” is when a
change in price causes
a larger change in
quantity demanded.
Example:
Beans in summer $2.00
People buy (more/less)
Beans in winter $4.00
People buy (more/less)
Inelastic Demand
Inelastic means that a change in price
causes a smaller change in the quantity
demanded.
People need medicine.
Will continue buy if price is low.
Will continue to buy if price is high.
Unit Elastic Demand
Unit elastic means that a given change in
price causes a proportional (equal) change
in the quantity demanded. (45˚ angle)
Price increases by $2
Quantity increases by 1
What determines demand elasticity?
Can the purchase be delayed?
(can I buy it later?)
Are adequate substitutes available?
(Snickers candy instead of Milky Way?)
Does the purchase use a large portion of
income?
( I have been saving for a new phone for a long time. Do I want
to use all of my savings for the phone and have nothing left?)