Transcript Demand - San Diego Unified School District

REMEMBER
1. Use the note-taking instructions that I
previously provided.
2. This is a SKELETON or Fill-In Outline of
notes.
3. User Interaction is Required – Merely
printing this does not constitute notetaking.
4. This means YOU must fill in details,
explain concepts and answer questions.
5. Leave room to write in information.
Chapter 4 Demand
LTO: Understand the concept of Demand
Ch 4, Section 1
• STGs:
1.
2.
3.
4.
Summarize the Section Objectives in your own
words without changing the meaning. Abbreviate
and shorten as needed.
What is Demand?
• The desire to own something (How badly do
you want a good or service) and your ability to
pay for it.
• Ex: John really wanted a new pair of shoes,
but had no money for them. So, even though
he wanted them, his demand for those shoes
was zero.
Check your vocabulary homework. Change
it/add to it as needed.
How do Prices Affect Demand?
• As the Price of a good increases, Demand goes
down.
• When the Price decreases, Demand goes up.
• This is the Law of Demand
Now write the short notes notation for this that I
gave in class.
Why does Demand do that?
Pg 80, Figure 4.2
Two causes:
1. Substitution Effect: instead of pizza, you buy
(substitute) burritos that are less expensive.
2. Income Effect: As the pizza price increased, you
cannot afford the same quantity, so you cut back on #
of slices of pizza and keep your purchases of other
goods the same.
NOTE: If you chose to buy pizza slices at the higher price
and gave up buying movie tickets instead, then the
Income Effect did NOT happen. You MIGHT do this if
there were no Substitutes and you were really hungry.
Q&A
• Pg 81, Figure 4.3
1. This Demand Schedule shows which effect
explicitly (requires no assumptions)?
2. How many slices did the Individual want at
50 cents/slice?
3. So, if the Market Demand is 300 slices, how
many people were buying pizza?
Demand Curve
• Graph the Individual Demand for the pizza.
• Vertical Axis: Price
• Horizontal Axis: Slices of pizza
Limits of a Demand Curve
• Shows only __________ (#) variables:
– _______________ and
– _____________________
How does Demand Affect Prices?
• The more Demand that there is for something,
the price increases.
• The less Demand – the price decreases.
NOTE: Supply affects prices too, but that’s in the next
chapter.
Section 2
Shifts of the Demand Curve
Pg 85. STGs:
1.
2.
3.
Summarize the Section Objectives in your own
words without changing the meaning. Abbreviate
and shorten as needed.
What is the assumption that is made
when drawing a Demand Curve?
• Ceteris paribus – (define)
• Only _______________ changes.
Changes in Price and Demand Curve
• So, since all other variables (color of shoes,…)
remains constant, the Demand Curve
demonstrates what happens to Demand when
there is a change in Price.
• Ex: Pg 86, Figure 4.6 GRAPH 1 ONLY
• How many slices were purchased (Quantity
Demanded) when the Price for Pizza increased to
$1.50 from $1.00?
• Did Demand: Increase, Decrease, Shift Out, Shift
In?
A Change in Demand
• Is a change in Quantity Demanded at EVERY
PRICE
• The Demand Curve will shift inward (less)
– Ex: Pg 86, Graph #2
or
• The Demand Curve will shift outward (more)
– Ex: Pg 86, Graph #3
What Causes a Shift
in the Demand Curve?
(The causes are on the next few slides)
1. Income – Summarize how income affects YOUR
DEMAND for different types/quality of goods.
– Inferior Goods
– Normal Goods
What Causes a Shift
in the Demand Curve? (cont’d)
2. Consumer Expectations
• If a Consumer expects the price of gas to go
up tomorrow, how will that affect how much
gas they want to buy today?
• If you know a pair of shoes go on sale next
week, what is the effect on your demand for
them today?
What Causes a Shift
in the Demand Curve? (cont’d)
3. Population
•
An increase in Population creates more demand
for:
•
•
____________________
____________________
• As Baby Boomers (born 1940s-1964) get older,
what is going to be the impact? (Read the last
paragraph).
What Causes a Shift
in the Demand Curve? (cont’d)
4. Consumer Tastes (Preferences) & Advertising
Give an example of how Consumer Tastes have
changed the demand for a good or service. Be
specific.
Advertising has the goal of getting Consumers to buy
a product or a service. So what effect do you think
Advertising generally has on the Demand Curve?
What Causes a Shift
in the Demand Curve? (cont’d)
5. Prices of Related Goods
•
Complements –
•
Ex:
• Effect on Demand for Jelly when the Price of Peanut Butter goes
up:
•
Substitutes –
•
•
Ex:
Effect on Demand: You like Tea and Coffee equally. The Price of
Coffee increases. What is the effect on Demand for Tea?
Section 3
Elasticity of Demand
• STGs:
1.
2.
3.
Elasticity of Demand
• Write the details below in your notes. Then, listen to the
Activity in Class. Write the Definition, the scenarios and
calculations of Elasticity . Allow 1 pg.
• Formula: (Pg 92, Figure 4.7)
= % change in Demand divided by
% change in Price
Unitary – Result is 1
Inelastic – Less than 1
Elastic – More than 1
Factors Affecting Elasticity
(explain the impact on Demand, don’t just fill in the blank)
1. Availability of _________________________
2. Relative Importance
3. Necessities vs ___________________
4. Change over Time
Elasticity and Revenue
• There is a balancing act facing Firms: Pg 96,
Figure 4.9
– When I lower the Price of Pizza, Demand Goes UP
BUT will the Increase in Sales be more than the Drop in
Profit per Slice?
It depends on the
Elasticity of Demand for the Pizza.
Elasticity and Pricing
of Pizza Slices
•
Participate in this Class Activity to determine what price to charge for Pizza.
Price
$1.00
$1.50
$2.00
$2.50
$3.00
$5.00 (effect of Change
over Time)
Slices Demanded
Total Revenue = Quantity
Demanded x Price per
Slice