Transcript A Picture is Worth a Thousand Words: Demand

A Picture is Worth a Thousand
Words: Demand
Unit 2 Lesson 8
One day you are shopping with your friends, and
you walk into a small greeting-card shop close to
school to buy a birthday card for one of your
relatives. While you are checking out the cards, you
overhear the owner complaining that a certain style
of card is not selling, and the display of that card is
taking up precious space in the small store.
“Unfortunately, I bought these cards up front and
they cannot be returned,” he says. As the store
owner looks over to you and your friends, he
continues: “I learned in my economics class in high
school that a person shouldn’t cry over spilt milk or
let costs incurred in the past influence future
choices-right?” It becomes obvious that the owner
is soliciting a response from you.
Do you support the owner’s view, or do you
suggest an alternative course of action?
Suggestions
Lower the price of the cards.
Put them on sale.
Place the cards in a more prominent
place in the store.
Donate the cards to charity.
Advertise the value of sending
greeting cards.
If you are going to throw them again,
at least recycle them.
Why do businesses put items on sale?
• To sell more merchandise.
• To reduce surplus merchandise and avoid
throwing away items that may still have value.
• To increase consumer demand.
When business people put products on sale,
they are attempting to predict consumer
behavior. They are predicting that the number of
products bought will increase at lower prices.
That is not the only possible way to increase
sales, of course. If the owner could change his
customers’ perception of value for the cards, the
customers also would buy more. Changing
customers’ perceptions is one of the purposes of
marketing through advertising.
Kramer and Newman
try to sell used records
to a dealer who is
buying them. He offers
what they believe to
be an insulting offer.
This shows that value
is determined by both
scarcity and desire;
without demand, even
a rare commodity has
no value.
King-Sized Candy Bar
Candy Bars Suggested Price
.50¢
.75¢
$1.00
$1.50
$1.75
$2.00
$2.50
$2.75
$3.00
Quantity Demanded
King-Sized Candy Bar
Candy Bars Suggested Price
Quantity Demanded
Determinants of Demand
Shift in Demand
• How did your buying
decision change after
you learned more about
chocolate and had the
I.O.U. option?
• How do the two graphs
of demand for candy
bars compare?
Shifts in Demand
• The demand for cars when people get a tax
refund.
– Shift Right
• The demand for gloves after the first snow storm.
– Shift Right
• The demand for hot dogs when the price of hot
dog buns rises.
– Shift Left
• The demand for gasoline today when people
expect prices to fall tomorrow.
– Shift Left
Objectives
1.
2.
3.
4.
Closure
Explain the relationship between price changes
and the quantity consumers are willing and able
to buy.
–
The law of demand states that consumers
will tend to buy less of a good or service at
higher prices and more at lower prices.
Graph an example of a consumer demand
schedule.
Predict how various events/conditions will shift
demand.
–
That people economize
–
That people respond to incentives in
predictable ways
–
That all choices involve costs
Use the law of demand to predict consumer
behavior in the marketplace.
–
The concept of demand can be used to
forecast what consumers will do when
prices change or when variables that affect
the actual demand for a product change
and create a new price-quantity
relationship.
Concepts
1. Demand – A schedule (or
graph) showing how many
units of a good or service
buyers are willing and able to
buy at all possible prices
during a period of time.
2. Determinants of Demand –
Factors other than the price
that change (shift) the demand
schedule, causing consumers
to buy more or less at every
price. Factors include income,
number of consumers,
preferences, and prices of
related goods.
3. Price – The amount of money
that people pay when they buy
a good or service; the amount
they receive when they sell a
good or services.