Transcript What is Demand 1

Supply & Demand #1:
What is Demand?
Journal
• What is the relationship between Rational
Self-Interest Theory and Demand?
– Copy AND answer
– Use your resources to help you make a
connection
Demand #1 Objectives
1. To describe and illustrate the concept
of demand.
2. To explain how demand and utility are
related.
Let’s Make Some Predictions About
Demand…
• A hair dye is successfully advertised in the media
– Prediction: Its demand curve will shift
RIGHT
LEFT
UP
DOWN
• People get tired of Beanie Babies
– Prediction: The demand curve for Beanie
Babies will shift
RIGHT
LEFT
UP
DOWN
Demand
• The desire, ability, and willingness to buy a
product
• Quantity demanded: amount demanded
Demand Schedule
A listing that
shows the
various
quantities
demanded of a
particular
product at all
prices that might
occur in the
market at a given
time
PRICE
QUANTITY
DEMANDED
$30
0
$25
0
$20
1
$15
3
$10
5
$5
8
Demand Curve
• A graph
showing the
quantity
demanded at
each and every
price that might
occur in the
market
Demand Curve in Action
PRICE
QUANTI
TY
DEMAN
DED
$30
0
$25
0
$20
1
$15
3
$10
5
$5
8
Law of Demand
• Quantity demanded varies inversely
(opposite) w/ price:
– Price goes up, demand goes down
– Price goes down, demand goes up
• If pineapples go on a sale, what happens to
the quantity demanded?
The Market and Demand
• Market Demand Curve – demand curve
that shows the quantities demanded by
everyone who is interested in purchasing
the product
Demand & Marginal Utility
• Marginal utility – the extra usefulness or
satisfaction a person gets from acquiring or
using one more unit of a product
• Diminishing marginal utility – the extra
satisfaction we get from using additional
quantities of the product begins to diminish
– Why don’t you watch 3 movies on 1 night?
– Why don’t you take 2 copies of the same newspaper?
Essential Questions
1. Describe the relationship between the
demand schedule and demand curve.
2. Describe how the slope of the demand
curve can be explained by the principle
of diminishing marginal utility.