Demand: Unit Outline Outline 1.Demand. 2.Quantity Demanded 3.Demand Curve 4.Price Effect 5.Substitute Goods 6.Complimentary Goods
© 2009 Pearson Addison- Wesley. All rights reserved. Demand: What is Demand? Quantity demanded - the amount of a good that consumers are willing and able to buy at a given price – holding constant the other factors that influence purchases Law of Demand - An inverse relationship between the quantity demanded and the price of a product – You buy more when something is cheap, and less when something is expensive
Demand: How to Measure Demand curve – Shows the quantity demanded at each possible price a model used to show how much of a good is demanded depending on price Price Effect – The inclination of people to buy less of something at higher prices than they would buy at a lower price
Figure 2.1 A Demand Curve Law of Demand consumers demand more of a good the lower its price, holding constant all other factors that influence consumption Price Quantity 0
Quantity Demanded vs Deman © 2009 Pearson Addison- Wesley. All rights reserved. 2-5 Quantity demanded – Will result in movement along an existing demand curve A result of a change in price Demand – Will result in a shift of the entire demand curve A result of “Demand Shifters”
Demand for Cellphones © 2009 Pearson Addison- Wesley. All rights reserved. 2-6 Price Quantity Demanded $ $ $ $
Change in Quantity Demanded 2-7 Price Quantity
2-8 Figure 2.2 A Shift of the Demand Curve p 1176 D1D1 D2D2 2 Q, 0 1
Demand Shifters Change in income Price/availability of substitute goods Price/availability of complimentary goods Change in the weather or season Change in the number of buyers Change in styles, tastes, habits Change in expectations about price
© 2009 Pearson Addison- Wesley. All rights reserved Solved Problem 2.1 How much would the price have to fall for consumers to be willing to buy 1 million more kg of pork per year?
© 2009 Pearson Addison- Wesley. All rights reserved Application: Aggregating the Demand for Broadband Service