Transcript Chapter 7 Section 2 Notes

Chapter 7 Section 2 Notes
The Demand Curve and
Elasticity
Demand Schedule
 Table showing
quantities
demanded at
different
possible prices.
Demand Curve
 Downward-Sloping
line that shows in
graph form the
quantities
demanded at each
possible price.
KEEP IN MIND
A change in quantity demanded (Is NOT
the same as ) ≠ a change in demand.
Determinants of Demand
 Factors that affect demand for a specific
product or service.
1)
2)
3)
4)
5)
Change in taste & preferences
∆ Population
∆ Income
∆ Substitute Goods
∆ of a Complementary Goods
Cont.
 Changes in Taste &
Preferences
 Example: Pokemon
 Change in
Population
Cont.
Change in Income
 Normal Goods – Income ↑ Quantity Demanded ↑
 Inferior Goods – Income ↑ Quantity Demanded ↓
Cont.
Substitute Goods – Goods that can be
used in place of another good.
Complementary Goods – Goods that go
hand in hand (Generally bought and sold
together for joint use).
Change in Demand vs. Quantity Change
Increase in Population
Decrease in Income
Substitute Goods
Complementary Goods
The Price Elasticity of Demand
Elasticity – Economic concept dealing
with consumer’s responsiveness to an
increase or decrease in the price of a
product.
Cont.
Elasticity of Demand – How much the
demand varies according to changes in
price.
Elastic Demand
Situation in which a given rise or fall in
product’s price greatly affects the amount
that people are willing to buy.
These are goods that usually have many
substitutes or they are luxury goods.
Example – A specific energy drink or soft drink
Inelastic Demand
Situation in which a product’s price change
has little impact on the quantity demanded
by consumers.
These are goods that are necessities or have
no or very few substitutes
Example – A medication you have to have or
Gasoline