Transcript Demand
Before we begin, work with your tablemates to plot the following points. After you’re done, connect the dots with a curved line. Then, take ONE of your papers to Ms. Meadows to be graded. Make sure everyone’s info. is the same! What is Demand? 21-1 The consumer’s • desire do you want it? • willingness will you pay the price? • and ability do you have the $$? to buy a good/service What is the Demand Schedule? Turn to p. 571. This info. tells us how many goods/services you will purchase at each price they are being sold. The demand schedule is on the (upper) left. It is the “list” of info. By looking at the demand schedule, • YOU are willing to buy: – 1 video games for $40 – but 3 videos for $10 • Hmmmm? Why is that?? – Because most people like a bargain! You’re also getting more goods for your money! What is the Demand Curve? It’s basically the same as the demand schedule! The only difference is that it is in the form of a “graph.” On page 571, it is on the (upper) right. • YOU are willing to buy: – 1 video games for $40 – 1 video games for $30 – and 3 videos for $10 Again! • the list/chart is the demand schedule • the graph is the demand curve Both have the EXACT same info. that tells how much you are willing to BUY at each price! Another Example: This is why the demand curve slopes downward! • As price goes down, quantity goes up! • • • • • • $50 $40 $30 $20 $10 $5 1 pair of shoes Look at the demand curve again for video games on p.571. When you plot the points, it slopes down b/c WE LIKE WHEN THINGS GO ON SALE! 5 pairs of shoes!! So, the Law of Demand says… Price & Quantity work in opposite directions • As price goes down, quantity goes up! b/c we like a sale! • As price goes up, quantity goes down! b/c we don’t like expensive goods! Individual Demand vs. Market Demand • indiv. demand = one consumer’s demand How many games will YOU buy? This is YOU! • market demand = many consumers’ demand How many games will ALL boys buy? How many games will ALL 10th graders buy? How many games will ALL girls buy? So, on page 571… The two boxes at the upper, top represent INDIVIDUAL DEMAND. The two boxes at the lower, bottom represent MARKET DEMAND. Remember, the ones on the left are schedules. The ones on the right are curves. Looking at the market demand on p.571 • consumers will buy 150 video games for $40 • But, consumers will buy 300 video games for $10 What is Utility? The pleasure, usefulness, satisfaction you get from a product • • • • I like this product! This product is useful to my tummy! I get satisfaction from this product! Therefore, I will BUY this product! Unfortunately, we will soon get tired of eating this product after 3 hours. • The utility we get from consumption of this pizza usually changes as we more & more of it. By the 6th slice of pizza, your utility ( pleasure/satisfaction) has usually decreased. Therefore, your need for it…your hunger for it… has diminished (or decreased). This is diminishing marginal utility!! What are the Factors that Affect Demand? 21-2 In other words, what influences your decision to buy a product? Price? Color? Style? ????????????????????? Remember… Demand is your YOUR •desire •willingness •ability to buy a good/service Factor #1: Changes in Population Increase in demand: Decrease in demand: • If a new apartment building is built next to our school, what businesses would see an increase in demand? • If our school or even Baptist Hospital closes down, businesses around here would see a decrease in demand. • = fewer customers, demand goes down • Hardees, the BP gas station… = more customers, demand goes up Factor #2: Changes in Consumers’ Taste (or style) Increase in demand: • When goods are popular! • What’s “in” this year? – Skinny jeans, off-the-shoulder shirts, etc. Decrease in demand: • When goods go out of style… • What’s old? – Platform shoes, jersey dresses, baggy jeans Few consumers! Lots of consumers! Demand goes up! Demand goes down! Factor #3: Changes in Consumers’ Income ($$$) Increase in demand: • people have $$, they buy!! Demand goes Decrease in demand: • people don’t have $$, they don’t buy. Demand goes Factor #4: Changes in Consumers’ Expectations Increase in demand: Decrease in demand: • a new product comes out, and everybody goes to buy it b/c people expect that the newer version is way better than the old one. • you see on TV that a new iPod or cell phone is coming out, so you wait patiently b/c you expect that the newer product will be so much better than the old one that’s out now. Demand goes Demand goes for for iPods CDs Factor #5: Changes in Substitutes Increase in Demand • Items that can be substituted… (drink orange juice instead of milk) (eat waffles instead of pancakes) • When the price of one goes down, the price of the substitute also goes down b/c the 2nd product doesn’t want to lose customers. Demand goes Decrease in Demand • When the price of one goes up, the price of the substitute also goes up b/c the 2nd product wants to keep up with the competition. But, consumers don’t like when prices go up. Demand goes versus versus Factor #6: Changes in Complements • Items that are used together… – – – – Price of DVD goes sugar & Kool-Aid waffles & syrup lamp & light bulbs DVDs & DVD players •When the price of one goes up, the price of the complement goes down. Price of DVDs goes (Usually, consumers aren’t willing to pay for two goods increasing at the same time!) Elastic vs. Inelastic Demand First, remember that anything that is “elastic” can be stretched and it’s flexible. Elastic Demand: • when the price changes, we are not affected by it b/c we can find a substitute to replace that particular good or service. price of coffee The price can go way up, and demand will change or stretch b/c we will buy a cheaper coffee…demand changed…demand stretched. Inelastic Demand Anything that is “inelastic” can’t be stretched, it’s not flexible, it stays the same & remains still. Inelastic Demand: • when price changes, we are affected b/c there isn’t a substitute to replace the item needed •price of prescription medicines The price can go way up, and demand will not change or stretch. Demand will stay the same b/c people need their medicine…inelastic demand. Again… Demand is your YOUR •desire •willingness •ability to buy a good/service You! You! You! You are the consumer! You are DEMAND!