Transcript Demand

Agenda- 3/31
1.
2.
3.
4.
5.
Current Events
Review test
Set-up Unit 2 in your Notebook
Start Ch. 4 Lecture (RS)
Ch. 4 Sec. 1 Bookwork (LS)
Unit 2 –
Microeconomics
Ch. 4 Demand:
First, some shorthand…
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Goods = G
Services = S
Increase = ↑
Decrease = ↓
Price = P
Demand = D
Quantity
demanded = Qd
Income = I
Change = Δ
DEMAND
Quantity of goods and services that
a consumer is
WILLING and ABLE
to purchase at various prices
Demand Schedule:
• List of quantities that would be
purchased at various prices
• Demand curve plots these points
• Shows graphically the
relationship between price and
quantity demanded
Demand Schedule
Price
Quantity Purchased
Weekly (Qd)
$20
21
$25
18
$30
15
$35
12
Demand Curve
(Inverse Relationship)
Price (P)
Demand (D)
Law of Demand
Quantity (Qd)
Law of Demand
The quantity demanded of a
good will be higher at lower
prices than the quantity
demanded at higher prices
Price goes up, Quantity Demand goes Down
P ↑, Qd ↓
Price goes down, Quantity Demand goes Up
P ↓, Qd ↑
Proof of the Law of
Demand:
• Income Effect
• Substitution Effect
• Marginal Utility
Income Effect
• Effect increasing or
decreasing prices has
on purchasing power
(less “income”)
Substitution Effect
• Change in the combination of
goods or services purchased
as a result of increasing or
decreasing relative prices of
possible substitute products.
Homework (left-side)
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P. 92 – “Econ Analysis”
p. 93 – Demand & Prices ?
p. 94 – Economic Analysis ?
P. 94 – “Reading Check”
p. 95 –Reading Check
P. 95 - # 1-4
Agenda: 4/3
1) Continue Demand lecture (slides # 14-18)
2) HW –Demand Packet
3) Don’t forget if you have a Current Event
tomorrow
4) Bring a Dry Erase Pen tomorrow!!!
5) Wed. will be Shark Tank work day
Marginal Utility
• Amount of satisfaction derived from
one additional unit of a product
• Law of diminishing marginal utility-
as additional units of a product are
consumed during a given period of
time, the additional satisfaction
derived from the good decreases
Law of Diminishing
Marginal Utility Graph
Utility
Click below to
play video
Diminishing Marginal Utility
Pause on “cookie chart” and add MU & TU to shorthand
Units of Goods
Change in Quantity Demanded (Qd)
v.
Change in Demand (D)
• In Quantity
Demanded
• Caused by an
increase or
decrease in price
• Causes a
movement ALONG
the demand line
• In Demand
• Explains why
people are willing
to buy more or
less of a good
• Causes a shift of
the ENTIRE
demand line
Homework
(hold the applause)
• Demand Packet –
– has Vocabulary
(that will be on the test)
– Applicable examples
– BRING A DRY ERASE PEN TUESDAY
OR LOSE POINTS!!!
Agenda: 4/4
1)
2)
3)
4)
Continue Demand Lecture
White Board Practice ; )
HW: Demand Determinant WS
Shark Tank Tomorrow
Determinants of Demand
• Factors that determine how
much will be purchased at
any given price
• Demand changes even if
there is no change in price
• The change will shift the
entire demand line
The Determinants
(“shifters”)
• Consumer income • Population
• Consumer attitude • Expectations
– Weather
• Price of a
–
Technology
complimentary
product
• Price of a substitute
product
Change in Income
• Normal goods- Demand
increase as income increases
(ie Coke or Pepsi)
• Inferior goods- Demand
decreases as income increases
(ie Sam’s Club Soda vs. Coke or Pepsi)
Changing Attitudes
• Tastes and Preferences
(i.e. Nike vs. Adidas)
• Trends (i.e. Casual attire
more acceptable in
business now.)
• Fads (Tattoos)
Changing Price of
Compliments
• Complimentary goodsProducts that are used
together (ie peanut butter and
jelly.)
• Decrease in the price of one
can increase the demand for
the other
Changing Price of
Substitutes
• Substitute goods- Products
similar enough they can
replace the other
• Change in the price of other
products causes change in
demand for a good
Expectations
• People’s expectations about the future
can change demand today.
– You may wait for new technology to
increase quality and/or reduce price.
– You may rush out and buy supplies if
the weather report says a terrible
storm is about to arrive.
population
• A change in the number of consumers
for a product
– More consumers = increased demand
– Less consumers = decreased
demand
Change in Qd vs Change in D
Change in Demand
Remember: The entire line shifts!
Price (P)
Increase
Decrease
Original
Demand (D)
Quantity (Q)
Did someone say “Whiteboards?”
• Have a whiteboard and dry-erase
marker ready to graph the following
examples and list the determinant.
Graph the effects
of the popularity
growth of
“joggers”
Demand Curve: Tastes
and Preferences
Price
D2
D1
Quantity
Graph the
effects of a cut
in paid work
hours on your
demand for
eating out
Income: demand decrease b/c
your income has decreased
Price
D2
D1
Quantity
The price of
Pepsi goes up.
Graph the
effect on CocaCola
Substitutable Goods: Demand
will go up for Coke
Price
D1
D2
Quantity
The price of
grape jelly goes
down.
Graph the
effect on peanut
butter.
complimentary Goods:
Demand will go up for
peanut butter
Price
D1
D2
Quantity
The weather channel
says there will flooding
in your neighborhood
tomorrow.
Graph the change for
demand of sand bags
today.
Expectations: demand
for sandbags increases
Price
D2
D1
Quantity
The weather channel
says there will be rain &
lightning storms at the
Michigan / ohio st.
football game. Graph
the change in demand
for t-shirt apparel at
the stadium at kickoff.
Change in Population-(less people @the game);
“Expect” to be cold – not buy t-shirts;
No one wearing them - not “trendy”
Price
D2
D1
Quantity
The weather channel says
there will be rain &
lightning storms at the
Michigan / ohio st.
football game. Graph the
change in demand for
Sweathsirt/jacket apparel
at the stadium at kickoff.
“Expect” to be cold-demand increase;
jacket “population” increases;
“Trendy”
Price
D2
D1
Quantity
Demand Summary
Demand ACDC
Homework – Determinant Packet
Price Elasticity of Demand
• Measurement of the relative
responsiveness of the
change in quantity
demanded as a result of a
change in price
Elasticity Equation
e=%
Qd
%
P
- Greater than 1 = Elastic
- Less than 1 = Inelastic
- Exactly 1 = Unit Elastic
Elastic Demand
• Elastic implies responsiveness
• (read don’t write this one) Price is elastic if
calculated value of price elasticity
is greater than one
• As the price of a good increases
the quantity demanded decreases
significantly
Elastic Demand Schedule
Price
Quantity Purchased
Weekly
%
%
$1.00
-
10
-
$1.05
5%
9
10%
$1.10
4%
7
22%
$1.15
4%
4
43%
Elastic Demand
Price
D
Quantity
Inelastic Demand
• Inelastic implies less sensitivity to
change in price
• (read don’t write this one) Price inelastic if
calculated value of price elasticity
is less than one
• As the price of a good increases
the quantity demanded decreases
minimally
Inelastic Demand Schedule
Price
$1.00
Quantity Purchased
Weekly
%
%
-
$2.00
100%
$3.00
$4.00
10
-
10
0%
50%
9
10%
33%
8
11%
Inelastic Demand
Price
D
Quantity
Elasticity of Demand (stop at 3:11)
Determinants of Price Elasticity
(Write the black, read the red)
• Number of substitutes (more
substitutes then more elastic; less
substitutes, then more inelastic)
• Importance of product in consumer’s
budget (small fraction of budget then
price elastic)
• Time period considered (shorter time
period then more inelastic demand)
Total Revenue
• Total amount of money a
company receives from its
sales – or:
–Total Revenue = price x
quantity sold (TR=PxQ sold)
• Quantity sold is dependent
on price
Relationship between Price,
Elasticity, Total Revenue
Elastic Demand
Inelastic Demand
Decreasing Price
Increases Total
Revenue
Decreasing Price
Decreases Total
Revenue
Increasing Price
Decreases Total
Revenue
Increasing Price
Increases Total
Revenue
Ch. 4 book assignment –
Needs to be initialed by me before
the end of the period
• Page 112 – 113
– # 19, 20, 22, 24, 29, 30
– When finished, grab the Elasticity Worksheet
for Homework
– Quiz on Monday – no notebook check though