Transcript Quantity Demanded

Bell work
Pay your Tuesday and Wednesday bills
When purchasing things to buy
 You evaluate your…
willingness to buy
ability to buy
Video Game
 $60
Bazbeaux’s Pizza
 15
King’s Island Tickets
 $70
Private Jet
 $8,000,000
Demand –
Consumer Behavior
Ms. Frey
What is Demand?
 Demand- the willingness to buy a good or service
and the ability to pay for it.
 Law of Demand-
As prices
As prices
quantity demanded goes up
quantity demanded goes down
Challenge Question #1
 You have $10 that you want to spend buying
music on iTunes.
 What quantity would you demand if the price was $1 a
song?
 What quantity would you demand if the price was $3 a
song?
 What caused the quantity of songs of that you
demanded to change?
Cheryl’s DVD Demand Schedule
 demand schedule- a table that shows
how much of a good or service an
individual consumer is willing and
able to purchase at each price in a
market.
 Notice that when the price falls, the
number of DVDs Cheryl will buy rises.
When the price rises, the number she
will buy falls. So quantity
demanded and price have an
inverse, or opposite relationship.
Price
per DVD ($)
Quantity
Demanded
30
0
25
1
20
2
15
3
10
4
5
7
Demand Curve
 demand curve- a graph that shows how
much of a good or service an individual
will buy at each price. (Displays the data
from an individual demand schedule)
 Avoid common mistake- downward
slope does not mean that quantity is
decreasing
 How many DVDs will Cheryl buy when
the price is $10?
Rafael’s DVD Market Demand Schedule
 market demand schedule- shows how
much of a good or service all consumers
are willing and able to buy at each price
in a market.
 Markets behave in the same way as
individual consumers. As prices fall, the
quantity demanded of DVDs rises. As
prices rise, the quantity demanded falls.
 How did Rafael create a market demand
schedule?


Surveyed customers
Reviewed sales figures to see how
many DVDs he sold at each price
Price
per DVD ($)
Quantity
Demanded
30
50
25
75
20
100
15
125
10
175
5
300
Market Demand Curve
 market demand curve- shows
the data found in the market
demand schedule. (Shows the
quantity that all consumers, or
the market as a whole, are
willing and able to buy at each
price.)
 At which price will Montclair
Video Mart sell 175 DVDs?
Challenge Question #2
What is the difference between an individual demand
curve and market demand curve?
Challenge Question #3
 Cheryl was unwilling to buy any DVDs at $30.
Montclair Video Mart can sell 50 DVDs at that
price. How do you explain the difference?
Law of Demand
 As prices fall… quantity goes up.
As prices increase… quantity demanded goes down
 P Qd or P Qd
 Inverse relationship between P (price) and Q (quantity)
  independent variable (Price)   dependent variable (Quantity)
 Called the “Price Effect” – Price caused consumer behavior
to change…we buy more or less because of the change in
price
Challenge Question #4
 Considering the law of demand, when the price of
concert tickets increase, what will happen to the
quantity that is demanded?
Read and Take Notes on
Chapter 4.2
Pgs. 106-113
Bell work
 1. Grab Freyonomy
 2. Pay Wed/ Thurs bills
 3. Pay Friday bills
 4. Check your math
 5. Get Ms. Frey to sign your paper
 6. Get your demand notes out from the last class
 6. Grab a book from the book shelf and start 4.2 notes on
pages 106-113
More about Demand Curves
 Law of diminishing marginal
utility- the marginal benefit
from using each additional
unit of a good or service
during a given time period
tends to decline as each is
used.
Change in Quantity Demanded
 A change in quantity demanded does not shift the
demand curve. The change refers to a movement
along the curve itself. Each point on the curve
represents a new quantity demanded.
Classzone.com
Change in Demand
 www.classzone.com
Changes in Demand
Income, Market Size, Consumer Tastes, Consumer Expectations, Substitute
Goods, Complimentary Goods
 Change in demand of hotel rooms
in Florida during the school year
Market Size
 Change in demand of silly bands
because WWFD (What Would Frey
Do) bracelets have become more
popular
 Consumer Tastes
 The price for peanut butter drops
which results in the rise of demand
for jelly
 Complements

 The prices of shorts and tank tops
go on sale because the new fall
clothing lines are arriving at stores
Consumer Expectations
 Matt gets a raise at work so he
decides to buy more normal goods
and less inferior goods
 Income
 The price of Advil rises so people
begin to buy the generic brands of
ibuprofen.
 Substitute Goods

Demand Determinants
 Consumers D
 Consumer Income  D
 Consumer Confidence   D
 Consumer Preferences   D
 Prices of Related Products:
Substitutes P BUTTER  D MARGARINE
Complements P CAMERAS D FILM
D
D
Chapter 4.3
Critical Thinking
Does quantity demanded always decrease if price rises?
List 3 goods or services that you think would remain in
demand even if the price rose sharply.
1.
2.
3.
Why does demand for these items change very little?
Key Concepts
 Buying habits affected by type of product and
importance to consumer
• Elasticity of demand- measure of how
responsive consumers are to price changes
 Elastic- quantity demanded changes greatly as price
changes
 Inelastic- quantity demanded changes little as price
changes
Firms must know the Price Elasticity of
Demand of their product!
Classzone.com
What determines elasticity?
Substitute goods or services
2. Proportion of Income
1.


Products that cost a higher percentage of our income tend
to be elastic (ex. photography products that cost you 10% of
your income)
Products that cost a lower percentage of our income tend to
be inelastic (ex. pens and pencils)
3. Necessity or Luxury
Challenge Question #5




Is demand for pizza elastic or inelastic?
Draw what this demand curve would look like.
Is demand for car seats elastic or inelastic?
Draw what this demand curve would look like.
Total Revenue Test
• Total revenue- amount of money company gets for selling
its products

Formula: Total Revenue= P (price) x Q (quantity sold)
 Total revenue test- shows total revenue from item at
various prices
 If total revenue rises after price drops, demand is elastic
 If total revenue decreases after price drops, demand is
inelastic
Challenge Question #6
Maria used to sell 100 cupcakes for $2. When she
changed the price to $3, she sold 60 cupcakes. Using
the total revenue test, determine whether her
cupcakes are elastic or inelastic.