Transcript Consumers and Demand

Consumers and
Demand
The Law of Demand
Demand: The desire to own something
and the ability to pay for it.
 The Law of Demand: Consumers buy
more of a good or service when its price
decreases and less when its price
increases.
 It’s all about getting the most for your buck
(e.g. the auction market)

The Demand Schedule
Price
Quantity Demanded
10
0
9
1
8
1
7
3
6
4
5
4
4
5
3
5
2
5
1
5
The Demand Curve
Price
Demand Curve
$15
$10
$5
$0
1 2 3 4 5 6 7 8 9 10
Quanitity Demanded
Shifts in Demand

What causes a shift?
 Income
 Normal Goods (Income
increases → Demand
increases)
 Inferior Goods (Income
increases → Demand
decreases)
 Consumer Expectations
(e.g. sales)
 Population (e.g. baby
boomers)
 Consumer Tastes and
Advertising
Consumer Tastes and Advertising

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Food
Fashion
Entertainment
Personal Health
Toys
Clothing
Shifts in Demand (Cont’d)

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As consumers earn
more money, they are
able to spend more.
Income effect: The
change in
consumption resulting
from a change in
income.
Shifts in Demand (Cont’d)

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Goods used in place of
one another
(substitute products –
e.g. sugar and
Splenda).
Two goods that are
brought and used
together
(complementary
products – e.g. hot
dogs and buns).
Elasticity of Demand
The degree to which changes in price
cause changes in quantity demanded
(Elastic vs. Inelastic).
 Two Reasons for Elasticity of Demand:

 The
relationship between income and cost of
the product (Car vs. Salt)
 Whether or not a substitute is available
(Butter vs. Margarine)