Transcript Demand - Doral Academy Preparatory

Chapter 4: Demand
Zachary Mcguire
Desi Diaz
Margarida Coimbra
Nicole Gonzalez
Andrea Guitierrez
Key terms
►
►
►
►
►
►
►
Demand- The desire to own something and the ability to pay for it.
Law of demand- Consumers buy more of a good when its price
decreases. And less when it’s price increase.
Substitution effect- When consumers react to an increase in a
goods price by consuming less of that good and more of the other
goods
Income effect- The change in consumption resulting from a change
in real income
Demand schedule- A table that lists the quantity of a good person
will buy at each different price.
Market demand schedule- A table that lists the quantity of a good
all consumers in a market will buy at each different price.
Demand curve- A graphic presentation of a demand schedule.
The Law of Demand
►
The law of Demand is “when a good’s price is lower consumers will
buy more of it” the law of demand is like a double edge sword. This is
basically as a goods price goes down the demand for that good goes
up. And vise versa as a goods price goes up the quality demand goes
down. For example, your neighborhood sandwich store sell sandwiches
for a dollar and fifty cents ($1.50) more people will buy the sandwich
increasing the number of sandwiches made. But if the owner increases
its prices to three dollars and fifty cents ($3.50) less people would buy
it therefore less sandwiches will be made. . The law of demand is a
combination of two different patterns. Those two different patterns are
called substitution effect and income effect.
The Substitution Effect
►
The substitution effect is simple the substitution effect is when
consumers react to increased price change of that good by either
consuming less of that good or more of another good. For instance If
that neighborhood sandwich store raise it prices and becomes more
expensive compared to other foods like pizza and burgers people will
more likely purchase pizza and burgers as a substitute for sandwiches.
Which causes less demand for sandwiches. The change in spending is
also known as the substitution effect.
Income Effect
►
Income effect is the change in consuming certain goods due to the
change in that person’s income. Meaning you will purchase less of
those goods due to less income. Have you ever had the feeling that
your getting poorer that your money doesn’t go as far as it used to it is
because your budget becomes more limited and you feel like you have
less money. Another example is your at school and a teacher sells
bagels for $1.00 then the price raises up to $2.00 you probably will still
buy bagels just not as many as you use to instead of buying two you
will limit your purchase to one because you will not have enough
money.
References
►
Second slide: http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-
8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-1160788&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6
264ef380478e9cb7a34380&isbnUrlIsJavascript=false
http://www.google.com/images?hl=en&sugexp=gsih&xhr=t&q=the+law+of+demand&cp=12&qe=dGhlIGxhdyBvZiBk&qesig=ex0kdtVeRrLyW5GRR54jPA&pkc
=AFgZ2tlnEBbGuCpYRiH5STjQkhHic2ptNJrf92jg6INohC7bBtyljUd9-F0q70NnxnFmMBhGIIGTtnM_qsYAlKJtI7dmHqKPw&bav=on.2,or.r_gc.r_pw.&wrapid=tljp1300847114268022&um=1&ie=UTF-8&source=og&sa=N&tab=wi&biw=1230&bih=540
►
►
Third slide: http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-1160788&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-1160788&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y
&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=false
Fourth slide
:http://www.google.com/imgres?imgurl=https://static.flatworldknowledge.com/sites/all/files/imagecache/book/28239/fwkrittenbergfig07_005.jpg&imgrefurl=http://www.flatworldknowledge.com/node/73569&usg=__7ak8ycJntvkz_oYxC8BWiv4DMIk=&h=336&w
=412&sz=14&hl=en&start=0&sig2=4aT9nzf2kQpvD6yNIhTLzQ&zoom=1&tbnid=VM1lyqOBYbjyPM:&tbnh=113&tbnw=139&ei=c
mCJTaGbFIGCtgeWoJH9DQ&prev=/images%3Fq%3Dsubstitution%2Beffect%26um%3D1%26hl%3Den%26biw%3D1230%26bih
%3D540%26tbs%3Disch:1&um=1&itbs=1&iact=hc&vpx=537&vpy=226&dur=4361&hovh=203&hovw=249&tx=129&ty=164&oei
=cmCJTaGbFIGCtgeWoJH9DQ&page=1&ndsp=23&ved=1t:429,r:19,s:0
►
Fifth slide
:http://www.google.com/images?um=1&hl=en&biw=1230&bih=540&tbs=isch%3A1&sa=1&q=broke&aq=f&aqi=g10&
aql=&oq=
►
http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-8&ISBNUrl=%2FiText%2Fproducts%2F013-116078-8%2Findex.html&ITEXTOID=0-13-1160788&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6
264ef380478e9cb7a34380&isbnUrlIsJavascript=false
Chapter 4
Section: 1
Presented by: Nicole
Gonzalez
Demand Schedule
►
Law of demand- The cost of a product and how it affects the quantity
demanded of that item.
Understanding Demand
► “To
have demand for a good” You need to
have enough money to be able to buy the
good that you want or need. If you can not
afford it then you can not buy it.
►
►
►
►
Market Demand Schedule- Shows the quantities demanded
at each price by all consumers in the market.
A demand schedule shows how much a product/good cost
and the quantity demanded per day. It also is separated
into two groups (Individual Demand Schedule and Market
Demand Schedule)
Individual demand- Shows specific quantities that a person
is willing to be able to purchase at a specific price.
Market demand- Shows the quantities demanded at each
price by all consumers in the market.
How are they different?
► The
difference between the two demand
schedules is that the market schedule list
larger quantities of demand.
Demand Curve
►
A demand curve is a graphic representation of a demand
schedule.
The market demand curve can be used to show how
people change their buying habits when prices go up or
down.
►
Market Demand Curve 
►
Resources
► Information:
Text book
► Picture
1:http://www.amosweb.com/images/MkDm31.gif
► Picture 2:http://mlm.business-opportunities.biz/wpcontent/uploads/2007/09/no-money-2.jpg
► Picture
3:http://mises.org/rothbard/mes/images/Table%206.gif
► Picture 4:http://www.bized.co.uk/sites/bized/files/images/mdemand.gif
Chapter 4: Section 2
Shifts of the Demand Curve
Zachary Mcguire
Vocabulary Words
► Ceteris
paribus- Latin term that means "all other
things held constant”
► Normal good- a good that consumers demand
more of when their incomes increase
► Inferior goods- a good that consumers demand
less of when their incomes increase
► Complements- two goods that are bought and
used together
► Substitutes- goods used in place of one another
Changes in Demand
►
►
►
A demand curve is only accurate as long as there are no
changes other than price that could affect the consumers
decision
When we drop the ceteris paribus rule and allow other factors
to change we no longer move along the demand curve
A shift in the demand curve means that at every price
consumers buy a different quantity than before (This shift of
the entire curve is what economists refer to as a change in
demand)
Pg. 85 online
textbook
What Causes a Shift?
Income:
► A consumers income affect his or her demand for
most goods
► Most goods that we purchase are normal goods
► There are also goods called inferior goods
Pg. 86 online
textbook
What Causes a Shift? contd.
Consumer Expectations
► Our expectations for the future can affect our demand for
goods today
► The current demand is positively related to its expected
price in the future
Population
► Changes in size will also affect the demand for most goods
Pg.87 online
textbook
What Causes a Shift? contd.
Consumer taste and Advertising
► Changes in tastes cannot be explained by changes in
income or population or worries about future prices
► Advertising is considered a factor that shifts the demand
curve because it plays an important role in many trends
Prices of Related Goods
► The demand curve for one good can be affected by a
change in the demand of another
Pg 87-88 online
textbook
Chapter 4 – Section 3
Margarida Coimbra, P2
►
Elasticity of Demand: a measure of how
consumers react to a change in a price.
►
Inelastic: describes demand that isn’t
sensitive to a change in price.
ex – a good that one will keep on buying
no matter the increase in price –
medicine.
►
Elastic: describes demand that is very
sensitive to a change in price.
ex – a good that one will stop buying due
to the increase in price – magazines.
Calculating Elasticity
Elasticity = (Percentage change in quantity of demand) / (Percentage
change in price)
Percentage Change = (Original Number – New Number) / (Original
Number) x 100
Law of demand implies that the result will always be negative:
►-
A increase in the price of a good will always decrease the
quantity demanded.
►-
A decrease in the price of a good will always increase the
quantity demanded.
►
The price of elasticity of demand
for a good varies at every price
level.
ex – would you still buy a
magazine which price was
raised 20cents? What if it was
raised $2,00?
►
Values of Elasticity have precise
mathematical definitions:
Inelastic < 1 < Elastic
Unitary Elasticity: = 1
►
When unitary the percentage
change in quantity demanded is
exactly equal to the percentage
change in price.
Factor Affecting Elasticity
►
Availability of Substitutes
Ex: Life-saving medicine – no
substitutes
Orange juice – substitutes
(other brands)
►
Relative Importance
The higher the jump in price, the
more you will have to adjust
your purchase. Although some
demands are always inelastic
because their consumption is
always low.
►
Necessities vs. Luxuries
ex: milk – always inelastic
cow meat – elastic
►
Change Over Time
- When price changes consumers
often need time to change
their shopping habits.
- Consumers don’t always react
quickly to a price increase
because it takes time to find
substitutes.
- ex: gasoline rise
led
consumers to buy smaller cars.
References
►
Second Slide
http://www.google.com/imgres?imgurl=http://www.crawfordsworld.com/rob/ape/APEMcConnellNotes/McConnellImages/linear_demand.gi
f&imgrefurl=http://www.crawfordsworld.com/rob/ape/APEMcConnellNotes/M1McConnell018.html&usg=__uh_er8PntldGvKKwduF0y4YasI=&h=362&w=399&sz=5&hl=en&start=0&zoom=1&tbnid=dUbG1_5htDj4yM:&tbnh=123&tbnw=132&ei=1JSITYrRFsu3twfM6qj
oDQ&prev=/images%3Fq%3Delasticity%2Bof%2Bdemand%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3D
isch:1&itbs=1&iact=hc&vpx=444&vpy=237&dur=297&hovh=214&hovw=236&tx=153&ty=136&oei=1JSITYrRFsu3twfM6qjoDQ&page=
1&ndsp=15&ved=1t:429,r:7,s:0
http://www.google.com/imgres?imgurl=http://www.babble.com/CS/blogs/strollerderby/2007/08/16-22/cough-medicinebabies.jpg&imgrefurl=http://www.babble.com/CS/blogs/strollerderby/archive/tags/cold%2Bmedicine/default.aspx&usg=__ZmG2lVwN
6bEtUDqZ7n4bvcXR7Ks=&h=480&w=400&sz=31&hl=en&start=0&zoom=1&tbnid=d6k7pbJGmzdkfM:&tbnh=136&tbnw=108&ei=ApWI
TdjdLo6TtwfZ58DlDQ&prev=/images%3Fq%3Dmedicine%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disc
h:1&itbs=1&iact=hc&vpx=610&vpy=226&dur=16&hovh=246&hovw=205&tx=81&ty=120&oei=ApWITdjdLo6TtwfZ58DlDQ&page=1&nd
sp=17&ved=1t:429,r:9,s:0
http://www.google.com/imgres?imgurl=http://keetsa.com/blog/wpcontent/uploads/2008/08/magazines.jpg&imgrefurl=http://keetsa.com/blog/reduce/do-you-use-digital-versions-ofmagazines/&usg=__kt81WFbxAPlAJSVoh3qlikSV9Mw=&h=300&w=460&sz=75&hl=en&start=0&zoom=1&tbnid=YLsYH3C7HEkVVM:&tb
nh=106&tbnw=163&ei=F5WITdGWHYabtwekdzcDQ&prev=/images%3Fq%3Dmagazines%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disch:1&itbs=1&i
act=hc&vpx=109&vpy=113&dur=2015&hovh=181&hovw=278&tx=194&ty=97&oei=F5WITdGWHYabtwekdzcDQ&page=1&ndsp=15&ved=1t:429,r:0,s:0
►
Fourth Slide
http://www.google.com/imgres?imgurl=http://www.ba.metu.edu.tr/~adil/BA-web/econ/equil.gif&imgrefurl=http://www.ba.metu.edu.tr/~adil/BAweb/econ/demand%2520supply.htm&usg=__nKewTU_mflmyUO4zDyLdhPKD5jc=&h=269&w=272&sz=7&hl=en&start=0&zoom=1&tbnid=_1OYjpDapzpRPM:
&tbnh=127&tbnw=128&ei=PoiITa7jPOWG0QHYybzoDQ&prev=/images%3Fq%3Dlaw%2Bof%2Bdemand%26hl%3Den%26sa%3DG%26biw%3D1020%26bih
%3D583%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=hc&vpx=479&vpy=237&dur=2454&hovh=215&hovw=217&tx=87&ty=137&oei=EoiITaXbGMndgQfIx
YC9DQ&page=1&ndsp=15&ved=1t:429,r:7,s:0
http://www.google.com/imgres?imgurl=http://www.tradingnrg.com/wp-content/uploads/2010/12/spot-gold-price-and-supply-demand-of-gold-2004-2010-percenctchange.jpg&imgrefurl=http://www.tradingnrg.com/the-gold-rush-is-there-a-bubble-in-the-gold-market-a-shortanalysis/&usg=__waxKpWWsVoPs37OWsmAOiH0efyo=&h=197&w=862&sz=34&hl=en&start=0&zoom=1&tbnid=HTJvIgRuAcx2sM:&tbnh=44&tbnw=193&ei
=YImITemwDs610QGPmPj2DQ&prev=/images%3Fq%3Dpercentage%2Bchange%2Bdemand%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2
%26tbs%3Disch:10%2C268&itbs=1&iact=hc&vpx=508&vpy=163&dur=28234&hovh=107&hovw=470&tx=218&ty=73&oei=AYmITcOcEojfgQe2zNnADQ&pag
e=1&ndsp=15&ved=1t:429,r:14,s:0&biw=1020&bih=583
►
Fifth Slide
http://www.google.com/imgres?imgurl=http://lifeinbonitasprings.com/wpcontent/uploads/2011/02/January2011Graph10Years_thumb.jpg&imgrefurl=http://lifeinbonitasprings.com/page/2/&usg=__IYeqlJ08tUC0hPHN6l4ib3orW4k
=&h=448&w=579&sz=61&hl=en&start=132&zoom=1&tbnid=9TI7ANaHFqsPHM:&tbnh=123&tbnw=159&ei=EIuITZyqCMqM0QGU5H2DQ&prev=/images%3Fq%3Dprice%2Brange%2Bgraphs%26um%3D1%26hl%3Den%26sa%3DN%26biw%3D1004%26bih%3D583%26tbs%3Disch:10
%2C4217&um=1&itbs=1&iact=hc&vpx=119&vpy=245&dur=3781&hovh=197&hovw=255&tx=156&ty=120&oei=soqITcPoJoGCgAepp4TaDQ&page=10&n
dsp=16&ved=1t:429,r:6,s:132&biw=1004&bih=583
http://www.google.com/imgres?imgurl=http://mrski-apecon-2008.wikispaces.com/file/view/unit_elastic/41643819/unit_elastic&imgrefurl=http://mrski-apecon2008.wikispaces.com/Chapter%2BFive&usg=__fFFR0DphAjdOBNmsTjxmWAI3TfQ=&h=421&w=468&sz=8&hl=en&start=0&zoom=1&tbnid=Ii9AEsNh9kR
WGM:&tbnh=136&tbnw=151&ei=F4yITY .
►
Sixth Slide
http://www.google.com/imgres?imgurl=http://www.heart-watch-blog.com/images/blogs/11-2007/blue-pills-4328260.jpg&imgrefurl=http://www.heart-watchblog.com/blogs/heart-news-blog.html&usg=__3zekMm0aAlyKNNkEdUGAK0eSnsw=&h=225&w=300&sz=10&hl=en&start=0&zoom=1&tbnid=cWhlwdxHGjusM:&tbnh=140&tbnw=212&ei=lI6ITdG9BKqC0QHVoc3_DQ&prev=/images%3Fq%3Dlife%2Bsaving%2Bmedicine%26um%3D1%26hl%3Den%26bi
w%3D1004%26bih%3D583%26tbs%3Disch:1&um=1&itbs=1&iact=rc&dur=266&oei=ho6ITfGdCsXpgQf7LDODQ&page=1&ndsp=13&ved=1t:429,r:5,s:0&tx=87&ty=88
http://www.google.com/imgres?imgurl=http://www.hung-truong.com/blog/wp-content/uploads/2007/11/simplyorange.jpg&imgrefurl=http://www.hungtruong.com/blog/2007/11/02/orange-juicesnobbery/&usg=__CwW9jexUd50HvzLn8xuPY4iIVw4=&h=257&w=380&sz=24&hl=en&start=17&zoom=1&tbnid=bQ1zutFYrVVjuM:&tbnh=128&tbnw=226
&ei=MY-ITcD2IZG0QG3m_DlDQ&prev=/images%3Fq%3Dorange%2Bjuice%2Bbrands%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C
627&um=1&itbs=1&iact=hc&vpx=267&vpy=95&dur=406&hovh=185&hovw=273&tx=148&ty=80&oei=146ITdDdFMTUgAfmq5nIDQ&page=2&ndsp=17&v
ed=1t:429,r:7,s:17&biw=1004&bih=583
http://www.google.com/imgres?imgurl=http://lodestonedynamics.com/wpcontent/uploads/2010/11/shoelace.jpg&imgrefurl=http://lodestonedynamics.com/2010/12/33-ways-to-tie-shoelaces/&usg=__izC0VslxLIDcEZCEzJLaALpVaU=&h=260&w=391&sz=13&hl=en&start=17&zoom=1&tbnid=SwnANgAGlmwcVM:&tbnh=128&tbnw=195&ei=kY-ITbjtIYnC0QGqtSJDg&prev=/images%3Fq%3Dshoe%2Blaces%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C175&um=1&itbs=1&
iact=hc&vpx=126&vpy=321&dur=2046&hovh=183&hovw=275&tx=184&ty=146&oei=hoITdHBIsbFgAeo9ri0DQ&page=2&ndsp=16&ved=1t:429,r:0,s:17&biw=1004&bih=583
►
Seventh Slide
http://www.google.com/imgres?imgurl=http://eraven.franklinpierce.edu/exch/72/72MilkBone.jpg&imgrefurl=htt
p://eraven.franklinpierce.edu/exch/72/index.shtml&usg=__gCFmNYh72_4m266cOV2SRLGToTY=&h=520&
w=360&sz=31&hl=en&start=35&zoom=1&tbnid=jXHitrJmqKh0CM:&tbnh=134&tbnw=105&ei=5ZCITYqbDp
OWtweL4In2DQ&prev=/images%3Fq%3Dmilk%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D58
3%26tbs%3Disch:10%2C850&um=1&itbs=1&iact=hc&vpx=251&vpy=164&dur=141&hovh=270&hovw=18
7&tx=122&ty=164&oei=2pCITYyGPMmTtwfB2dHuDQ&page=3&ndsp=16&ved=1t:429,r:1,s:35&biw=1004&
bih=583
http://www.google.com/imgres?imgurl=http://lh6.ggpht.com/_DmkgB8xkk0/SjrWQFnXksI/AAAAAAAAAw8/3___cs8BJoQ/Price%2520per%2520Gallon.jpg&imgrefurl=http://ww
w.mommybytes.com/2009_06_01_archive.html&usg=__Q8mCpPJkYsU10jG-0aYpLixWqE=&h=411&w=539&sz=41&hl=en&start=18&zoom=1&tbnid=YXQ6MKPUE2nqM:&tbnh=123&tbnw=161&ei=wpGITfeZHYe3twe5m8XjDQ&prev=/images%3Fq%3Dgasoline%2Bprice%2Bl
ast%2B50%2Byears%2BUSA%2Bgraph%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26t
bs%3Disch:10%2C525&um=1&itbs=1&iact=hc&vpx=132&vpy=276&dur=3484&hovh=196&hovw=257&tx
=168&ty=136&oei=rJGITZ_eMIWatwexkcTDQ&page=2&ndsp=13&ved=1t:429,r:9,s:18&biw=1004&bih=583
►
Information taken from Economics Workbook.
Chapter 4
Section 3: Elasticity and Revenue
Elasticity and Revenue
► Important
to study Economics because
elasticity helps measure how consumers
respond to price changes for different and
various products.
► Demand determines how change in prices
affect a firm’s total revenue or income.
Total Revenue
► Total
Revenue: Total amount of money a
firm receives by selling goods or services.
►
Determined by two factors:
 Price of the goods.
 Quantity sold.
Revenue Table
Price of slice of
pizza:
Quantity demanded Total Rev.:
per day:
.50
300
$150.00
$1.00
250
$250.00
$1.50
200
$300.00
$2.00
150
$300.00
$2.50
100
$250.00
$3.00
50
$150.00
ELASTIC DEMAND
► Elastic:
Buy much less of a good after a
small price increase.
► Price of product is lowered, the total
revenue rises.
► Price of product is raised, the total revenue
falls.
INELASTIC DEMAND
► Inelastic:
Demand for a good that you will
continue to keep buying despite price
increase.
► Price of product is lowered, the total
revenue falls.
► Price of product is raised, the total revenue
rises.