Transcript Demand? - Cloudfront.net

Supply & Demand Analysis
Ms. Stack
Fall 2008
Economics
DEMAND
Assignment #1
Warm-up
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List 5 things that you have
“demanded” in the past month –
what do I mean by demand?
Why do you demand (choose)
one good over another – what
are the factors/determinants in
why you buy something?
List 5 things you would demand
if scarcity did not exist.
What is “Demand?”
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A willingness to buy a product
at a certain price
Demand is from the perspective
of the buyer
What are some examples of
goods you demand as a
consumer?
Miss Stack’s “Demand List”
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Would you
prefer brand
name or
generic
products?
Law of Demand
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People will buy
more of a
product at a
lower price than
a higher price
Why do you
think this holds
true?
Demand Schedule
Demand Schedule
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A list of quantity of a product
that people are wiling to buy at
each price
At which price are consumers
willing to buy the LEAST
pizzas? The MOST?
ONLY PRICES WILL CHANGE
“QUANTITY DEMANDED”
Quantity Demanded
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A movement along the Demand
Curve that DOES NOT result in a
shift – a shift results ONLY when
one of the Determinants of
Demand is affected
A price change simply moves you
to a new point on the SAME curve
Demand Schedule Example
Demand Schedule
A Shift/Change in Demand
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A change in demand is
determined by a factor in the
“Determinants of Demand”
The curve will either shift to the
left (decrease) or right
(increase)
Determinants of Demand
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Consumer Tastes and
Preferences
Potential Customers
Money Income of Consumers
Substitute Goods
Complementary Goods
Price Expectations
Tastes & Preferences
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People have different tastes &
preferences
Food, Music, Clothes, etc
Advertising, Fashion, & Fads
also influence your tastes and
preferences for a good
Potential Customers
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A large number
of consumers
can produce a
greater demand
for the good
$ Income of Consumers
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If income increases, consumers
will demand “normal goods”
instead of “inferior goods.”
Normal goods=luxury goods–
brand names (i.e. Guess?,
Levi’s, The Gap, Nordstrom’s)
Inferior goods=“non-brand
name” goods (i.e. 99 cent store,
Target, Outdoor Flea Markets)
Substitute Goods
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If the price of one good increases,
the consumer will buy the alternative
(or “substitute”) good, instead.
This usually happens with similar
products.
If the price of a can of Coca-Cola
increases to $2.00 while a can of
Pepsi is $1.00 (and if you are
indifferent between both), which one
would you choose?
Complementary Goods
Some goods “go together.” They
will “complement” one another.
 If the price of one complement
good increases, the other good
will also increase (vice versa).
 Examples:
--Cereal & Milk --Cookies & Milk
--Peanut Butter & Jelly
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Price Expectations
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If people expect that prices of a
good will increase, it will (and
vice versa).
This will result in a change in
demand and shift the demand
curve.
Demand Curve
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A downward sloping line
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The demand curve illustrates an
positive relationship between
price & quantity
Supply and Demand Graph
Demand Curve (Right Shift)
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Increases in
Demand Curve
will shift to the
right
Demand Curve
(Leftward Shift)
Demand Wrap-Up
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When we study Demand we are looking at
whose perspective?
What is the difference between “Quantity
Demanded” and “Change in Demand?”
What are the “Determinants of Demand?”
Define “substitute goods” and give an
example.
Define “complementary goods” and give an
example.
Draw a Demand & Supply Graph-show
Prices, Quantity, & Equilibrium
BLOOD DIAMOND Clip
Questions
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Why did the world leaders meet in Belgium
at the G8 Conference?
Aside from diamonds, what other natural
resources in Africa was exploited in the past?
What is the profit from conflict (or “rough”)
diamonds used for?
Of the world’s total supply of diamonds,
how much is the US responsible for
purchasing?
How much money is made in the diamond
industry?
What percentage of conflict diamonds
account for the industry?