Transcript Demand - Cobb Learning

Demand
Outline
I. What is Demand?
A. Demand Schedules
B. The Law of Demand
C. Demand Curves/Market Demand
II. Change in Demand vs. Change in Quantity
Demanded
A. Change in Demand
B. Change in Quantity Demanded
What is Demand?
As we discussed earlier - there is a limited
amount of goods out there. So how do we
decide what we want? The concept of
demand captures this issue. Demand is
made up of two elements:
– Desire for Goods and Services
– Means to purchase those Goods and Services
Demand Schedules
• Lets consider how many CDs you might demand
in a month. (This is called “Quantity Demanded”)
• We will first look at this information in a table
called a “Demand Schedule”
• Demand Schedule - a table showing the
relationship between the price of a good and the
quantity demanded per period of time, ceteris
paribus.
– ceteris paribus: means "assuming all else is held
constant". The attempt to distinguish an effect of one
kind of change from any others.
Demand Schedule
Price of CDs ($)
Quantity Demanded
per month
Demand Schedule
P ($)
Qd
$20
5
Demand Schedule
P ($)
Qd
$20
5
$15
7
Demand Schedule
P ($)
Qd
$20
5
$15
7
$10
15
Law of Demand
• Law of Demand - the price of a product (or
service) is inversely related to the quantity
demanded, ceteris paribus.
Demand Schedules and Curves
• Another way of characterizing Demand
instead of using a schedule is a Demand
Curve.
• Demand Curve - a diagram showing the
relationship between the price of a good and
the quantity demanded per period of time,
ceteris paribus.
Demand Curve
Demand Curve
P($)
Note: ALWAYS label your axes!
Qd per month
Demand Curve
P($)
20
15
10
5
0
5
10
15
Qd per month
Demand Curve
P($)
20
A
15
10
5
0
5
10
15
Qd per month
Demand Curve
P($)
20
A
B
15
10
5
0
5
10
15
Qd per month
Demand Curve
P($)
20
A
B
15
C
10
5
0
5
10
15
Qd per month
Demand Curve
P($)
20
A
B
15
C
10
D
5
0
5
10
15
Qd per month
Market Demand Curve
• The demand curve we just drew was the
Demand for CDs by one person.
• Market Demand Curve - a curve showing
the relationship between the price of a good
and the total quantity demanded by all
consumers in the market per period of time,
ceteris paribus.Market demand curves are
obtained by summing the demand curves of
individual consumers.
Market Demand Schedule
• Market Demand Schedule - a table showing
the relationship between the price of a good
and the total quantity demanded by all
consumers in the market per period of time,
ceteris paribus.
• Market demand schedules are obtained by
summing the demand schedules of
individual consumers.
Market Demand Schedule
5
Mary’s
Qd
3
10
2
15
1
P($)
Market Demand Schedule
5
Mary’s
Qd
3
John’s
Qd
12
10
2
8
15
1
3
P($)
Market Demand Schedule
5
Mary’s
Qd
3
John’s
Qd
12
Tom’s
Qd
7
10
2
8
5
15
1
3
4
P($)
Market Demand Schedule
5
Mary’s
Qd
3
John’s
Qd
12
Tom’s
Qd
7
Market
Qd
22
10
2
8
5
15
15
1
3
4
8
P($)
Change in Demand vs. Change in
Quantity Demanded
This is a very important distinction. In short a change in demand is a shift in the
WHOLE demand curve. People are willing
to buy more (or less) at every price.
Change in D vs. Change in Qd
• Change in Demand - a change in the desire
or means to purchase the good, thus there is
a change in quantity demanded at EVERY
price.
• Change in Demand - a shift of the demand
curve
• A demand curve is drawn under the
assumption of ceteris paribus.
• When this assumption is relaxed, the entire demand
curves shifts
Change in D vs. Change in Qd
• Changes in Demand
• Increase in demand - demand curve shifts to the
right
• Decrease in demand - demand curve shifts to
the left
Change in Quantity Demanded
• Change in Quantity Demanded (DQd) movement along a demand curve
• A change in quantity demanded can only be
caused by a change in the price of the good.
• Changes in Quantity Demanded
• Increase in Qd - a movement to the right along a
demand curve
• Decrease in Qd - a movement to the left along a
demand curve
Increase in Demand
Increase in Demand
P
Qd
Increase in Demand
P
D
Qd
Increase in Demand
P
D
Qd
Increase in Demand
P
D
D’
Qd
Increase in Qd
Increase in Qd
P($)
Qd
Increase in Qd
P($)
D
Qd
Increase in Qd
P($)
A
D
Qd
Increase in Qd
P($)
A
D
Qd
Increase in Qd
P($)
A
B
D
Qd