Transcript Demand - OnslowNet

Economics
Basic Concepts
& Demand
Economics is about…
Scarce Resources
Limited Means
Unlimited Wants
Choices
Opportunuity
Costs
Scarcity
Resources are limited (scarce)
Our wants are Unlimited
We have limited means to satisfy our unlimited
wants
•Limited Income
•Limited Time
•Limited Skills
“Means” also have a cultural
dimension.
• “Means” can also include family, & for Maori,
there is the Whanau, Hapu (Sub Tribe), & Iwi
(tribe) support, as well as the distribution of
Maori fishing resources & other Treaty
settlements.
• The ability to collect fish/seafood under
customary rights can add to a person’s means.
(i.e. providing access to fishing resources that
are unavailable to others).
What does this mean?
Can many of your needs & wants be satisfied by
your family?
• E.g. Love, Protection, Support and or
Accommodation.
For Maori both Whanau and the Iwi or Hapu can
provide more ways to satisfy needs and the wants.
• E.g. Scholarships, Housing, Education, Culture
Cultural Means In Practice
1.
Explain how customary fishing rights can increase
a tribe’s means?
2.
On a marae near the beach some of the women of
the local iwi (tribe) weave baskets using flax that
grows nearby. In contrast, the Riley’s tend to buy a
bag or basket when they need one.
3.
What does this tell us about the way various groups
solve economic problems?
4.
State the economic problem that requires people
and groups to make choices. (NCEA)
Choice
Every time we make a choice we miss out on
the next best alternative
Opportunity Cost = “the next best alternative
forgone when a decision is made”
Goods and Services
Goods = Physical items you can see
or touch (tangible)
Services = when you pay people to do
something for you (Intangible)
Sort the following into goods and services
and then add 4 more to each list:
Snowboard, haircut, tennis racquet, tennis
lesson, video hire, video player, ice-cream.
Types of Goods
• Free Goods = goods that are not scarce and
therefore have no price
– E.g. Rain-water, sand on the beach
• Economic Goods = goods that are scarce
and have a price
• Consumer Goods = used by consumers
• Capital Goods = used by
producers to make other goods & services
What is Demand?
Demand is what Consumers are willing and
able to purchase at given prices. This is
shown in a Demand Schedule and a
Demand Curve.
Key Terms:
• Consumers = People who buy goods &
Services
• Demand = Willing to purchase
Demand
Demand Schedule =
a table showing
combinations of price
and quantity
demanded
Demand Schedule for cans of
coke demanded in a week
Price ($)
Quantity Demanded
(no. of cans)
0.25
10
0.50
5
1.00
3
2.00
1
Demand Curve = a graph plotting combinations of
price and quantity demanded
Title
Demand Curve for cans of Coke
Labels &
Units on
axes
2.5
Price $
2
1.5
Scale even
1
Plot Points
joined
0.5
D
0
0
5
10
Quantity Demanded (no. of cans)
15
Labelled
curve
Best Mnemonic challenge…
Draw your own Demand Curve from the Demand
Schedule for Coke
Demand Curve for cans of Coke
2.5
Price $
2
1.5
1
0.5
D
0
0
5
10
Quantity Demanded (no. of cans)
15
Law of Demand
When Price decreases, quantity Demanded
increases
(or When Price increases, quantity Demanded
decreases )
Demand Curve for cans of Coke
2.5
Price $
2
P ↑ QD ↓
P ↓ QD ↑
1.5
1
0.5
D
0
0
5
10
Quantity Demanded (no. of cans)
15
Change in Quantity Demanded
Change in quantity Demanded = when price
changes there is a movement along the demand
curve from one quantity to another.
Demand Curve for cans of Coke
2.5
Price $
2
1.5
1
D
0.5
0
0
5
10
Quantity Demanded (no. of cans)
15
Memorise it!
Law of Demand = As price increases, quantity
demanded _____________.
Or:
As price decreases, ________ __________
_________.
A change in ________ causes a movement along
the demand curve.
Change in Demand
• A demand curve is drawn assuming “ceteris
paribus”.
• Ceteris Paribus = “all factors affecting
demand are held constant except price.”
• If any factor apart from price changes, we
must shift (move) the demand curve. This is
called a change in demand.
Increase in Demand
Demand Curve for cans of Coke
2.5
Price $
2
1.5
1
D2
0.5
D1
0
0
5
10
Quantity Demanded (no. of cans)
Quantity Demanded has increased at each and every price
15
A Change in Demand.
An Increase in Demand.
Price
$ 5
A Decrease in
Demand.
Price
$
4
4
P1
P1 3
2
1
0
5
D1
D
1 2 3 4 5 6 7 8 9
Q1
Q2 Quantity
Demand has increased from 3 to 7.5 units.
3
2
1
0
D
D1
1 2 3 4 5 6 7 8 9
Q2
Q1 Quantity
Demand has decreased from 7 to 3 units.
Determinants of Demand. (T.I.C.S)
•
So what are the factors that will cause the entire
demand curve to shift?
•
•
•
•
•
Tastes and preferences change
Income changes
Complements price change
Advertising
Substitutes price change
I ate six chocolate truffles
Income
• A person’s income will Jono’s Demand Schedule for DVD’s
affect their ability to
each week
demand goods and
Price 2008 Quantity
2009
services. As income
($)
(DVD’s)
Quantity
increases, demand
(DVD’s)
increases.
• Eg. Jono spends
2
2
5
money on hiring
DVD’s each week.
4
1
4
• Last year he earned
6
0
3
$20 each week, but
this year he earns $50
8
0
2
each week.
Tastes and Preferences
• A person’s tastes and preferences will influence
their willingness to demand.
• Many factors can influence our tastes and
preferences:
– Age
– Gender
– Culture
– Upbringing
– Fashion
– Peers
– Advertising
– Season
• Write your own example for each factor
• Choose 3 factors and for each draw a sketch graph
to show how your demand has changed for a good
Price of a Substitute
• Substitute = a
good or service
that can be used
instead of another
good or service.
Videos
Margarine
Coke
Chinese
takeaway
Onslow College
Texts
DVD’s
• When the price of a substitute increases, demand
for the other good increases.
• Eg. When the price of Coke increases, demand
for Pepsi increases.
Demand Curve for Coke
Demand Curve for Pepsi
P2
P1
D2
D1
D1
Q2
Q1
Price of a Complement
• Complement = a
good or service that
can be used with
another good or
service.
Playstation
Cars
Cell Phone
MP3 Player
Digital Cameras
Playstation
games
• When the price of a complement decreases,
demand for the other good increases.
• Eg. When the price of Play stations decreases,
demand for Play station games increases.
PS2
PS2 Games
P1
P2
D2
D1
D1
Q1
Q2
Aggregate Household Patterns
• The economy is made up of many households.
Each household demands a wide range of
products.
• Aggregate refers to the whole economy, and
includes every households demand for all goods
and services
• There is a strong relationship between aggregate
household income, saving and consumption.
• Any factor that affects aggregate household
income will have an impact on aggregate
household spending and saving.
Types of Goods
• Inferior Goods = Goods that when income
increases demand decreases eg. No frills
toilet paper, baked beans.
• Normal Goods = basic necessities that when
income increases demand increases. Eg.
Bread, school uniform
• Luxury Goods = goods we desire. As income
increases households switch to more
luxuries.
The Relationship Between Aggregate
Spending and Household Income.
Spending
As income increases, so
does spending on
necessities
As income increases,the
% spent (proportion)
decreases as
households substitute
necessities (& inferior
goods) for luxury goods
Necessities e.g.
clothing, food,
shelter
Income
The Relationship Between Aggregate
Spending and Household Income.
Spending
As income increases
the $ spending on
luxuries increases
As income increases the
% of income spent on
luxuries also increases
Luxuries and
other services
e.g. health
insurance…
Income
The Relationship Between Aggregate
Spending and Household Income.
At low income levels
households do not
save.(all income is
spent)
$
As income increases
the amount saved
increases and the % of
income saved
increases.
Savings
Income
Quick Maths Lesson…
• Converting Numbers into a %
– amount / total x 100
– eg. Ji Eun Saves $40 out of $500 each week
– 40 / 500 x 100 = 8%
• Simplifying a ratio
– divide both sides by the same number
– 12% : 33% ( divide by 3)
–
4 : 11
Quick Maths Lesson…
• % of an amount
– % / 100 x amount
– Eg. 40% of $600
– 40 / 100 x $600 = $240
•
•
•
•
Mean = average (Total / no. of items)
Median = middle (Put in order first)
Mode = most common
Range = biggest - smallest
Values
• core beliefs or principles that affect what
we do or think
• Values affect the economic decisions
consumers make
Values Positions
A. The death penalty for murder should be
introduced
B. Gay marriage should be allowed
C. Year 11 is too young to be having sex
D. Abortion is a right everyone should have
E. Marjuana should be decriminalised
F. The drinking age should be raised to 20
Strongly
Agree
Agree
Disagree
Strongly
Disagree
Types of Values
• Thrifty
• Honesty/Integrity
• Gender Equity
• Fair Trading
• Care for the environment
• Equity/fairness
• Personal freedom/Privacy
• Work ethic
• National pride
• Youth/Beauty/fashion
• Family values
•making decisions to please the family or
following family traditions.
•concern for the future
•selling in an honest and fair way
•getting value for money
•following laws/doing the 'right thing.'
•linked to the idea of always working hard.
•Being able to do what you like
•following a popular image
•love of your country.
•wanting a 'fair go' for the under-privileged.
• feminism – fairness for each sex
The Simpsons and their Values
Choose at least 4 of the Simpsons
characters and for each one explain what
their values are.
Give an example that shows their values
affecting a decision they have made.
Influence on our Values
•
•
•
•
•
•
•
Upbringing
Age / experience
Cultural beliefs
Peer pressure
Religious beliefs
Gender
Media
For each influence:
give an example of how it
could affect one of your
values
give an example of it
affecting an economic
decision.
Eg. Media: Liz is addicted to
magazines and TV and now
values youth/beautyfashion.
She spends lots of $ on
make-up and clothes
Market Demand
• A market is made up of more than one
Consumer
• Market Demand = the sum of individual
demand at each and every price
• It is calculated by horizontally adding
individual demand curves at each and
every price.
Demand for Potatoes
Price
$ per
box
Meghan’s Evarn’s
Quantity
Quantity
Demanded Demanded
Rachel’s
Market Quantity
Demanded
Quantity
Demanded
5
9
5
5
8
6
4
3
12
3
2
1
Add it up and
Graph it!