Transcript A Lesson on Demand

A Lesson
on
Demand
What is Demand?

Willing and able to purchase a product at a
particular price
 How many of you would like a Porsche [or
like vehicle]?
 How many of you are able?
 What’s the difference between willing and
able?
 Idea of time and place – at this time, you may
be willing to buy a Porsche, but are not able,
therefore you do not have a “DEMAND” for a
Porsche
Demand Schedule
A
table that lists at various prices, the
number of items demanded
Demand Curve – the graphic representation of
demand
Graphing a Demand Schedule:
1. The lower left quadrant is “0”
2. The vertical axis is price
3. The horizontal axis is quantity
Graph the
numbers from
the Lollipop
Demand
Schedule
Example: Demand for Lollipops
Totals
10
20
30
40
50
Law of Demand
 As
price falls, the quantity demanded
increases. As the price rises, the
quantity demanded decreases
 P QD
Price per pound of
coffee beans
Quantity of Coffee
Beans Demanded
(billions of pounds)
$2.00
7.1
1.75
7.5
1.50
8.1
1.25
8.9
1.00
10
Demand Curve for Coffee Beans
Change in Quantity
Demanded vs. Change in
Demand
 Change
in Quantity Demanded:
 Caused
by change in own price of good
 Movement along the curve
 Change
in Demand:
 Caused
by Change in determinant of
demand
 Shift to new demand curve
Demand Determinants
 Income
 Normal
Good: a good for which demand
increases as consumer incomes rise (milk)
 Inferior Good: A good for which demand
decreases as consumer incomes rise
(ground chuck, bus rides)
 As income rises consumers tend to switch
from consuming these inferior goods to
consuming normal goods (ex. steak,
car/plane)
Determinant - Income
Determinants con’t
 Preference/Taste
 Likes
and dislikes in consumption
 Consumer
Expectations
 Change
in future price of goods
 Change in future income
 Population
 As
Change
the number of consumers in a market
changes the demand will change
Determinants con’t
 Consumer
 Change
Expectations
in future price of goods
 Change in future income
Determinants con’t
 Population
 As
Change
the number of consumers in a market
changes the demand will change
Determinants con’t
 Prices
of Related Goods
 Substitutes:
Goods that are related in such
a way that an increase in the price of one
leads to an increase in the demand for the
other [goods that can be consumed in
place of one another] (Pepsi and Coke)
 Compliments: Goods that are related in
such a way that an increase in the price of
one leads to a decrease in the demand for
the other [goods that are normally
consumed together] (hamburgers and
french fries)
Determinants con’t
 Related
Compliments
Goods
Substitutes