Bell work Pay your Tuesday and Wednesday bills

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

What is Demand? Demand- the willingness to buy a good or service and the ability to pay for it. Law of Demand- As prices quantity demanded goes up As prices quantity demanded goes down

Challenge Question #1 You have $10 that you want to spend buying music on iTunes. What quantity would you demand if the price was $1 a song? What quantity would you demand if the price was $3 a song? What caused the quantity of songs of that you demanded to 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

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

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?

Challenge Question #2 What is the difference between an individual demand curve and market demand curve?

Challenge Question #3 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?

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 (price) and Q (quantity)  independent variable (Price)   dependent variable (Quantity) Called the “Price Effect” – Price caused consumer behavior to change…we buy more or less because of the change in price

Challenge Question #4 Considering the law of demand, when the price of concert tickets increase, what will happen to the quantity that is demanded?

Read and Take Notes on Chapter 4.2 Pgs

Bell work 1. Grab Freyonomy 2. Pay Wed/ Thurs bills 3. Pay Friday bills 4. Check your math 5. Get Ms. Frey to sign your paper 6. Get your demand notes out from the last class 6. Grab a book from the book shelf and start 4.2 notes on pages

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

Changes in Demand 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 Income, Market Size, Consumer Tastes, Consumer Expectations, Substitute Goods, Complimentary 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D

DD

Chapter 4.3

Critical Thinking Does quantity demanded always decrease if price rises? List 3 goods or services that you think would remain in demand even if the price rose sharply Why does demand for these 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? 1. Substitute goods or services 2. Proportion of Income Products that cost a higher percentage of our income tend to be elastic (ex. photography products that cost you 10% of your income) Products that cost a lower percentage of our income tend to be inelastic (ex. pens and pencils) 3. Necessity or Luxury

Challenge Question #5 Is demand for pizza elastic or inelastic? Draw what this demand curve would look like. Is demand for car seats elastic or inelastic? Draw what this demand curve would look like.

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

Challenge Question #6 Maria used to sell 100 cupcakes for $2. When she changed the price to $3, she sold 60 cupcakes. Using the total revenue test, determine whether her cupcakes are elastic or inelastic.