Transcript Unit 3 Demand

Demand
STANDARD 1.3.2
Do Now
 What are some of the most
influential factors in determining
peoples choices?
 What do you demand? What does that mean the
word demand?
Do Now
Where is your favorite
place to shop for
clothes, food etc,.
Explain why
Demand
Essential Question:
How do consumers use
the law of demand to
respond to changes in
market condition?
Law of Demand
 Law of Demand: Definition…
An
Increase price causes
decrease in Quantity Demanded
Decrease in price causes an
increase in Quantity Demanded
Law of Demand
 Quantity demanded and price move in opposite direction
Price
Goes
h
Quantity
Demanded
i
THE MORE
SOMETHING IS,
THE LESS PEOPLE
CAN BUY
Law of Demand
Price
Goes
i
Quantity
Demanded
h
THE CHEAPER SOMETHING IS, THE MORE PEOPLE CAN BUY
Demand vs. Quantity Demanded
 Demand: how many
things you would be
willing to buy at many
difference prices
 Quantity Demanded:
how many things you
would buy at one
specific price/time
period
Do Now
Explain/Describe the
law of demand
What influences your demand?
 What influences your demand? Why
does the Law of Demand exist? Three
main things…
1. Income Effect
2. The Substitution Effect
3. Diminishing Marginal Utility
1
 Income Effect: any increase or decrease in
consumer’s purchasing power caused by change in
price

Our resources ($$) is limited so price changes can impact our
demand
Income Effect…
 April 2014, McDonald’s is getting back to basics
after a string of disappointing quarterly results in
its home market of the United States, which
accounts for 30 percent of overall revenue.
 The fast-food giant has reported roughly two
years of turbulent sales at established U.S.
restaurants due to sluggish economic growth,
stiffer competition and internal missteps that
have complicated menus and slowed service.
 Adding to the pressure, higher costs for beef,
chicken and labor are squeezing profits
because customers are cutting back on
visits as McDonald’s raises prices to offset
the additional expenses.
Which one is better?
Which one would you rather buy?
Which one can you buy?
2
 Substitution Effect: When customers choose not to
buy an expensive thing but buy a cheaper, similar thing
instead

Growth of Dollar Stores: “And Dollar General isn’t the only
dollar chain to have had success in recent years. Competitors
Dollar Tree and Family Dollar have also experienced
significant growth in revenue since the 2008 recession, when
many consumers began shopping at discount chains for
everyday items like cleaning supplies, toiletries and groceries.”
Diminishing Marginal Examples…
 What decreases as Squidward eats the crabby
pattys?
Value of each food item
 https://www.youtube.com/watch?v=hlpBw48b
gEo
 Is demand limitless?
No!
3
 Diminishing Marginal Utility: As more units of a
product are consumed, the satisfaction received from
consuming each additional unit goes down


Diminish=Go down
Utility= Value
Graphing…
 What does diminishing utility look like visually
by graph?
 This is the same way we graph demand
Demand Schedule
 Do a quick
sketch of this
chart (A and
B only)
 Charts!
Agenda 3-10-15
 1. Complete the “Create Your Own Demand Schedule
& Graphing Assignment”

Follow directions properly with Law of Demand and examples
from notes
 2. Read pages 97-101 from textbook and answer
Questions 2-4 at the bottom of your graphing
assignment. Use complete sentences
 3. Read the entire article “Bernie Sanders wins Big
with Michigan Muslims” AND record just one
question or comment you have at the bottom of your
graphing assignment
Do Now
Explain the substitution effect.
Squidward eating crabby patties represents what
learned concept?
Do Now
Describe the substitution
effect
What is diminishing
marginal utility
Law of Demand
 **Price is the
main variable
affecting
demand**
 Change in price
causes a slide on
the *same*
demand curve
Determinants of Demand
 Other factors influence demand as well,
its not just price
 These factors can shift the entire
demand curve left or right, instead of
simply causing a slide along the old
demand curve
Determinates of Demand
 MAIN IDEA:
If demand increases the demand curves moves to
the
RIGHT
Determinates of Demand
 MAIN IDEA:
If demand decreases the demand curve moves to
the
LEFT
5 Determinates of Demand
1. Changes in Number of
Consumers
2. Changes in Income
3. Changes in Tastes and
Preferences
4. Substitutes
5. Complementary Goods
Do Now
What is the one thing that
will NEVER shift the demand
curve?
How did Friday’s cartoon
(Futurama) help you
understand demand?
Determinants of
Demand
Increase in Number of
Consumers
The demand curve moves right
(increases) when number of consumers
grows
More people = More Demand
Decrease in Number of
Consumers
The demand curve moves left (decreases)
when number of consumers shrinks
Less people = Less Demand
Changes in Income
The demand curve moves right
(increases) when Income grows
More Money = More Demand
Changes in Income
The demand curve moves left (decreases)
when income shrinks
Less Money = Less Demand
Changes in Tastes and
Preferences
The demand curve moves right (increases) when
people choose to buy certain items because of
fads or popularity
More Sales = More Demand
Changes in Tastes and
Preferences
The demand curve moves Left (decreases) when
the items becomes less popular.
Less Sales = Less Demand
Substitutes
The demand curve moves right (increases) when the
price of a similar item goes up
Less Competition = More Demand
Substitutes
The demand curve moves left (decreases) when the
price of similar item goes down
More Competition = Less Demand
Complementary Goods
The demand curve moves right
(increases) when the price of a
complementary good goes down
Complementary Goods
The demand curve moves left (decreases)
when the price of a complementary
good goes up
Demand Curve
 Demand Curve:
goes
downward as
you move left
to right across
the graph
(graph price vs.
quantity
demanded)
Key Point to Remember!!
 The price of the product itself will
never cause a shift (left/right) in
demand.
 Only the 5 Determinants will shift the
demand curve and create a brand new
one.

\
What has caused this shift in demand?
A. an increase in the price of film
B. an increase in the price of cameras
C. a decrease in the price of film
D. a decrease in the price of cameras
Which direction does the Demand Curve Move?
Situation:
The Ford and Chrysler have just guaranteed a 15%
cut in wages for all employees.
What will happen to the demand for luxury goods
in areas with a lot of auto workers?
What determinate are we using?:
CHANGE IN INCOME
What direction will the Demand Curve
move?:
LEFT
Which direction does the Demand Curve Move?
Situation:
If Kroger has a great sale on spaghetti sauce, what
effect should they expect it to have on spaghetti
noodles?
What determinate are we using?:
COMPLIMENTARY GOODS
What direction will the Demand Curve
move?:
RIGHT
DO NOW
What are the
determinants of
demand?
What is the one thing
that will never shift
demand?
Demand vs. Quantity Demanded
What is the difference between a Change in Demand and
a Change in Quantity Demanded?
“Do Now” (Rubber Band)
 As a consumer, how sensitive are you to
changes in an increase price?
 What
are products you would continue to buy after a
price increase?
 What are products you would stop buying?
Price Elasticity of Demand
 Main Idea:
Elasticity of Demand: measures how much the
Quantity Demanded changes when price
goes up or down
Elastic Demand
Definition:
Elastic Demand: Situation in which a given rise or
fall in a products price “greatly” affects the
amount that people are willing to buy
Big Change in Quantity Demanded!
Elastic Demand
Examples:
Things that we want, but do not need
Higher priced goods, Brand name items, luxury goods
Inelastic Demand
Definition:
Inelastic Demand: Situation in which a product’s
price change has “little” impact on the
Quantity Demanded by consumers
Inelastic Demand
Examples:
These are Needs and will still be purchased
regardless of price
Medication, staple foods, Gasoline
More Info
HOW DO I FIGURE OUT IF A
PRODUCT OR SERVICE IS
INELAESTIC OR ELASTIC! Write them
down!
What are the three major factors that determine the price
elasticity of demand for a particular item?
1. Availability & Price of Substitutes
2. How much of your budget you spend on the good
3. Amount of time you have to adjust to a change
Do Now
Explain the
difference between
inelasticity and
elasticity
Do Now
 What is inelasticity vs. elasticity?
 Explain diminishing marginal utility
Review Guide
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Define: Law of Demand
What affects a slide along the demand curve?
Determinants of Demand / Shifting the Curve
Substitution Effect
Income Effect
Diminishing Marginal Utility
Demand Inelastic / Elastic (Understand differences
between the two)
Do Now
What is your opinion of the
current minimum wage debate?
What should the minimum
wage be? Should there be one
at all?