Transcript Demand - Duluth High School

Demand
Jump Start Chapter 4 section 1
1.
The Law of Demand states that
A.
B.
C.
D.
2.
The demand curve is always
A.
B.
C.
D.
3.
Demand
Consumerism
Marginal utility
Diminishing marginal utility
All of the following must exist for there to be demand EXCEPT:
A.
B.
C.
D.
5.
Upward sloping
Downward sloping
Level
Irregular
Buying only one instead of two sodas at lunch time describes what concept?
A.
B.
C.
D.
4.
More will be purchased at low prices than at high ones
Less will be purchased at low prices than at high ones
Approximately the same amount will be purchased at low prices than at higher prices
All people have the ability, and willingness to buy
A desire to buy a product
Producers to sell a product
An ability to buy a product
A willingness to buy a product
Which of the following statements does NOT describe the demand curve?
A.
B.
C.
D.
Prices are listed on the vertical axis
Quantities demanded are listed on the horizontal axis
The demand curve represents the various combinations of process and quantities demanded
that could occur in the market
It shows that demand for a product over time rather than at a given point in time
Microeconomics
• Area that deals with
– Behavior and decision making by small units
(individuals and firms)
– Collectively- these concepts help explain
• How prices are determined
• How individual economic decisions are made
What is Demand?
Demand
• Desire, ability, and willingness to buy a
product
• Can compete with others who have similar
demands
• Microeconomic concept
• People and Firms act in best interest to
answer
– WHAT, HOW, and FOR WHOM
Demand Illustrated: Example
• Bicycle Shop
– Ask: Where the demand is?
• Set up where have a lot of bicycle riders and few
shops
– Ask? How do you measure demand?
• Visit other shops to gauge reactions of consumers
• Poll consumers (prices, determine demand)
• Study past data
– Gives you idea of desire, willingness, and
ability for people to pay
Individual Demand Schedule
• A listing that shows
various quantities of
demanded of a
particular product at
all prices
• How much would you
be willing and able to
purchase over a
range of possible
prices?
Figure 4.1
The Demand for Compact Discs
Demand Curve
• Individual demand
curve illustrates how
the quantity that a
person will demand
varies depending on
the price of a good or
service
– Increase in demand =
curve will shift right
– Decrease in demand=
curve will shift left
Figure 4.1
The Demand for Compact Discs
Demand Schedule illustrated in a
Demand Curve
Figure 4.1
The Demand for Compact Discs
Figure 4.1
The Demand for Compact Discs
The Law of Demand
• States that the quantity demanded of a
good or service varies according to price
– Price goes up = quantity demand goes down
– Price goes down = quantity demanded goes
up
Foundations for the Law of
Demand
• Two reasons for calling it a LAW
– Inverse relationship between price and
quantity demanded
– Common sense and simple observation
• People do buy more of a product at a
LOW price
• People buy LESS when the product is at a
HIGH price
Market Demand Curve
• Demand curve that shows quantities
demanded by everyone who is interested
in buying the product.
Market Demand Curve
Figure 4.2
Individual and Market Demand Curves
Demand and Marginal Utility
• Reminder: Utility –
– used to describe the amount of usefulness or
satisfaction that someone get from the use of
a product
• Marginal utility:
– the extra usefulness or satisfaction a person
gets from acquiring or using one or more unit
of a product
Demand and Marginal Utility
• Diminishing marginal utility
– The extra satisfaction we get from using
additional quantities of the product begins to
diminish
– Not willing to pay as much for 2nd, 3rd, or 4th as
we did the first
– Why Demand curve is DOWNWARD sloping
• Marginal utility < the price = STOP buying
Chapter 4 Section 1 Vocabulary
A.
B.
C.
D.
E.
Microeconomics
Demand curve
Demand
Marginal utility
Diminishing marginal
utility
1. Graph showing the quantity
demanded at each and every
price at a given time
2. The decrease in satisfaction or
usefulness received from each
additional unit of a product
3. The desire, ability, and
willingness to buy a product
4. Area of economics that deals
with behavior and decision
making of small units
5. The extra usefulness or
satisfaction a person gets from
acquiring or using one more
unit of product
Jump Start Chapter 4 section 1
1.
The Law of Demand states that
A.
B.
C.
D.
2.
The demand curve is always
A.
B.
C.
D.
3.
Demand
Consumerism
Marginal utility
Diminishing marginal utility
All of the following must exist for there to be demand EXCEPT:
A.
B.
C.
D.
5.
Upward sloping
Downward sloping
Level
Irregular
Buying only one instead of two sodas at lunch time describes what concept?
A.
B.
C.
D.
4.
More will be purchased at low prices than at high ones
Less will be purchased at low prices than at high ones
Approximately the same amount will be purchased at low prices than at higher prices
All people have the ability, and willingness to buy
A desire to buy a product
Producers to sell a product
An ability to buy a product
A willingness to buy a product
Which of the following statements does NOT describe the demand curve?
A.
B.
C.
D.
Prices are listed on the vertical axis
Quantities demanded are listed on the horizontal axis
The demand curve represents the various combinations of process and quantities demanded
that could occur in the market
It shows that demand for a product over time rather than at a given point in time
Factors Affecting Demand
Jump Start Chapter 4 section 2
1.
Which of the following would cause a change in quantity demanded for a
product?
A.
B.
C.
D.
2.
How does the demand curve respond to an increase in demand?
A.
B.
C.
D.
3.
A decrease in consumer income
The substitution effect
Changing consumer taste
An increase in the price of related products
All of the following are examples of complements EXCEPT:
A.
B.
C.
D.
5.
The curve shifts left
The curve shifts right
There is movement along the curve
There is no change in the curve
All of the following would cause a change in demand of a product EXCEPT?
A.
B.
C.
D.
4.
Changing consumer taste
Increasing consumer income
Decreasing the price of the product
Changing prices of related products
Butter and margarine
Flashlights and batteries
Peanut butter and jelly
Cameras and film
A change in the number of consumers can cause
A.
B.
C.
D.
The demand curve to shift
A substitution effect
The market demand curve to shift
Prices to fall
Change in Quantity Demanded
• Change in the amount of a product
purchased when there is a change in price
• Income Effect
– As prices drop, consumers are left with extra
real income
• Substitution Effect
– Price can cause consumers to substitute one
product with another similar cheaper item
Change in Quantity Demanded
Figure 4.3
A Change in Quantity Demanded
When there is a change in quantity demanded
the change appears along the curve
Change in Demand
• People buy different amounts of the
product at the same prices
• Change in demand results in a new curve
– Right = increase
– Left = decrease
• Why Change?
– Income, taste, the price of a related good,
expectations, and the number of consumers
Change in Demand
Figure 4.4
A Change in Demand
Changes Happen
• Income:
– Up = afford to buy more goods and services
• Demand curve shifts to right
– Down = cause them to buy less of the good at
each and every price
• Demand curve shifts to the left
• Taste
– Advertising, news reports, fashion trends, the
introduction of new products, changes in
seasons
Changes Happen
• Substitutes:
– Competing products
that can be used in
place of one another
– An increase in the
price of one
increases the
demand for the other
– Ex: Butter and
Margarine
• Complements:
• Products that increase
the value of other
products
• An increase in the price
of one reduces the
demand for both
• An increase in the use
of one will increase the
use of the other
• Ex: film and camera
Changes Happen
• Expectations
– Way you think about the future
• New technologies of tomorrow
• Number of Consumers
– Increase in number of consumers causes the
demand curve to shift
– Decrease = shift in demand curve
• Also shifts the market demand curve to the left =
decline in market demand when anyone leaves the
market
Change in Demand v. Quantity Demanded
• People buy different
amounts at the same
price
• Shows a move from
one curve to the other
• Affected by price
• Move along the same
curve
Chapter 4 section 2 Vocabulary
A. Change in quantity
demanded
B. Income effect
C. Substitution effect
D. Substitutes
E. Complements
1. Change in quantity
demanded due to change in
price that alters a consumers
real income
2. Illustrated by movement
along the demand curve
3. Products that tend to be used
together
4. A change in quantity
demanded due to change in
the relative price of a product
5. Products that can be used in
place of other products
Jump Start Chapter 4 section 2
1.
Which of the following would cause a change in quantity demanded for a
product?
A.
B.
C.
D.
2.
How does the demand curve respond to an increase in demand?
A.
B.
C.
D.
3.
A decrease in consumer income
The substitution effect
Changing consumer taste
An increase in the price of related products
All of the following are examples of complements EXCEPT:
A.
B.
C.
D.
5.
The curve shifts left
The curve shifts right
There is movement along the curve
There is no change in the curve
All of the following would cause a change in demand of a product EXCEPT?
A.
B.
C.
D.
4.
Changing consumer taste
Increasing consumer income
Decreasing the price of the product
Changing prices of related products
Butter and margarine
Flashlights and batteries
Peanut butter and jelly
Cameras and film
A change in the number of consumers can cause
A.
B.
C.
D.
The demand curve to shift
A substitution effect
The market demand curve to shift
Prices to fall
Elasticity of Demand
Jump Start Chapter 4 section 3
1.
Total expenditures are determined by
A.
B.
C.
D.
2.
multiplying the price of a product by the quantity demanded
measuring the elasticity of a product
dividing the price of the product by demand
dividing the demand doe the product by its price
The relationship between the change in price and total expenditures for an elastic
demand curve is
A.
B.
C.
D.
3.
Variable
Unit elastic
Inverse
Direct
All of the following are determinants of demand elasticity EXCEPT:
A.
B.
C.
D.
Whether the purchase of the product can be delayed
Whether there are adequate substitutes for the product
Whether the purchase of the product requires a large portion of income
Whether the product has utility
A company decreases the price of a gallon of milk by 10 percent and the company’s
total revenues fall significantly. What term best describes the demand for milk?
4.
A.
B.
C.
D.
5.
Elastic
Inelastic
Unit elastic
Demand elastic
All of the following products have relatively inelastic demand EXCEPT:
A.
B.
C.
D.
A physician’s services
Tobacco products
Stereo equipment
Prescription drugs
Demand Elasticity
• Elasticity: measure how sensitive
consumers are to price change
• Demand Elasticity: the extent to which
change in price causes a change in
quantity change
• Because some goods and services are
affected by price more than others, we
classify demand as either elastic or
inelastic.
Demand Elasticity
Elastic
Inelastic
• Small price changes
• Price changes don’t
can make big
affect demand
changes in demand
• Lower price will NOT
• Amount bought will go
affect the amount
up when price goes
bought
down
• You can’t wait to buy
• You can wait to buy
Demand Elasticity
• Unit elastic: when a change in price cause
a proportional change in demand
– Percent change in quantity approx. = percent
in price
– i.e.: 5% drop in price approx. = 5% increase
in quantity demanded
The Total Expenditures Test
• TET: the amount that consumers spend on
a product at a particular price
Figure 4.5
The Total Expenditures Test for Demand Elasticity
Demand is elastic if you answer
YES to the following questions:
• Can the purchase be delayed?
– Yes = elastic
– No = inelastic
• Are adequate substitutes available?
– Yes = elastic
– No = inelastic
• Does the purchase use a large portion of your
income?
– Yes = elastic
– No = inelastic
(Ex: car)
(Ex: salt)
Vocabulary Chapter 4 section 3
A.
B.
C.
D.
E.
Elasticity
Demand elasticity
Elastic
Unit elastic
Inelastic
1. The extent to which a change in price
causes a change in the quantity
demanded
2. Describes demand when a given change
in price causes a relatively smaller
change in the quantity demanded
3. Describes demand when a given change
in price causes a proportional change in
the quantity demanded
4. A measure of responsiveness that shows
how a dependent variable such as
quantity responds to an independent
variable such as price
5. Describes demand when a given change
in price causes a relatively larger change
in the quantity demanded
Jump Start Chapter 4 section 3
1.
Total expenditures are determined by
A.
B.
C.
D.
2.
The relationship between the change in price and total expenditures for an
elastic demand curve is
A.
B.
C.
D.
3.
Whether the purchase of the product can be delayed
Whether there are adequate substitutes for the product
Whether the purchase of the product requires a large portion of income
Whether the product has utility
A company decreases the price of a gallon of milk by 10 percent and the
company’s total revenues fall significantly. What term best describes the
demand for milk?
A.
B.
C.
D.
5.
Variable
Unit elastic
Inverse
Direct
All of the following are determinants of demand elasticity EXCEPT:
A.
B.
C.
D.
4.
multiplying the price of a product by the quantity demanded
measuring the elasticity of a product
dividing the price of the product by demand
dividing the demand doe the product by its price
Elastic
Inelastic
Unit elastic
Demand elastic
All of the following products have relatively inelastic demand EXCEPT:
A.
B.
C.
D.
A physician’s services
Tobacco products
Stereo equipment
Prescription drugs