Transcript Quantity Demanded

Bell work
Get your Freonomy and wait for further
instruction
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
Mr. Westerfeld
Mrs. Smith
What is Demand?
 demand- the willingness to buy a good or service and the ability to pay
for it.
 law of demand-
As prices fall…
quantity demanded goes up
As prices increase… quantity demanded goes down
 You have $10 and want to buy some music from
iTunes. If prices of songs on iTunes rose from
$.99 to $3, how would your quantity demanded
of songs change?
Cheryl’s DVD Demand Schedule
 demand schedule- a table that shows
how much of a good or service an
individual consumer is willing and
able to purchase at each price in a
market.
 Notice that when the price falls, the
number of DVDs Cheryl will buy rises.
When the price rises, the number she
will buy falls. So quantity demanded
and price have an inverse, or opposite
relationship.
Price
per DVD ($)
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?
 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?
Create a demand schedule showing how many pizzas
you would buy at the prices of $25, $20, $15, $10
and $5.
Price per Pizza
($)
Quantity
Demanded
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 and Q
  independent variable (P)   dependent variable
(Q)
 Called the “Price Effect” – Price caused consumer
behavior to change…we buy more or less because of
the change in price
Read and Take Notes on
Chapter 4.2
Pgs. 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 (Increase in demand)
D (Decrease in demand)
Chapter 4.3
Critical Thinking
Does quantity demanded always fall if the price rises?
List 3 goods or services that you think would remain in
demand even if the price rose sharply.
Why does demand for those 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
3. Necessity or Luxury
1.
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