Demand Chapter 4

Warm Up: Dec. 1st Write down whatever you can remember about the last time we discussed Economics.

Who or what decides what you get?

Warm up: December 2, 2014 What are the 3 types of economic systems? How does each determine the answers for the 3 economic questions?

Sit in groups of 4 Today you’ll be producing bracelets!!! After they are made, you can sell them to others, and you can purchase bracelets produced by other teams.

ROUND 1 You’ll have 5 minutes to make bracelets You MUST follow the directions given to you – DO NOT deviate from the directions.

END ROUND 1 How many bracelets did your team produce? Put them in the container in the center of the table.

ROUND 2 You’ll have 5 minutes to make bracelets. You MUST follow the directions given to you – DO NOT deviate from the directions. MARKET GROUPS: you may get additional supplies as needed.

END ROUND 2 How many bracelets did your team produce? Put them in the container in the center of the table.

ROUND 3 You’ll have 5 minutes to make bracelets. You MUST follow the directions given – DO NOT deviate from the directions. MARKET GROUPS: you may get additional supplies as needed.

END ROUND 3 Command Groups: Divide up tokens evenly. Market Groups: How will you divide up the tokens? Did everyone do the same amount of work?

WELCOME TO THE MARKETPLACE! Set up your marketplace COMMAND: bracelets will cost 2 tokens each MARKET: choose prices and label bracelets with prices (1, 2, or 3 tokens each)

ROUND 4 You earned money at work, congratulations! Now you can use that money to buy bracelets! You will have 5 minutes to… Go to the marketplace table for your economy Determine which bracelets you can afford and want to purchase Pay the shopkeeper for your bracelets Return to your desk

Debrief: How did it feel to be in the command economy group? The market economy group? How did production vary between the command economy group and the market economy group? How did purchasing vary between these groups? Why do you think people would want their country to have a market economy? A command economy?

Wednesday

Wednesday, Dec. 3 Sit in your normal seats Compare the answers on your graphic organizer with your table. Be prepared to share answers on BOTH sides of the graphic organizer, even for the economy of which you did not participate.

What is Demand? The willingness to BUY a product Essential in understanding the market Determines pricing Quality of goods and services Distribution of goods and services

How many of you would buy a coffee for… $2 $5 $3 $6 $4 $7 $8

Demand Schedule/Curve

Law of Demand Demand varies INVERSELY with its price Price Demand WHY?

In other words, You have to be willing to buy the item, AND have enough money to pay for it. If you want something and can afford it, you’ll buy it. If you want something but don’t have enough money, then you can’t buy it. If you don’t want something even though you can afford it, you won’t buy it.

Thursday

Warm Up- 12/4/14 Create a demand schedule and graph for the following quantities and prices… 100 pairs of Vans for $50 78 pairs of Vans for $75 62 pairs of Vans for $80 51 pairs of Vans for $90 32 pairs of Vans of $110

CHANGE IN $= MOVES ON CURVE CHANGE IN PRICE … When there is a change in the price, there will be a change in the QD That means the points moves ON THE CURVE CHANGE IN $= MOVES ON CURVE

Changes in Demand

Changes in Demand Buy different amounts at same prices Creates new curve _____________________ 1. Consumer Income 2. Consumer Trends 3. Price of Related Products

http://www. amosweb. com/cgi-bin/awb_nav. pl http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=change+in+demand

Consumer Income Change in consumer income changes demand Income D Ex. Poor economy Both up or both down Why? Income D Income D

Consumer Income Which curve represents increase in consumer income? Decrease in consumer income? How did you determine your answers?

Consumer Taste Pop D Pop D Trends, ads, news affect consumer taste Ex. Bell bottom jeans Both go up or both go down Why? Pop D Pop D

Consumer Taste Create a graph depicting the shift of demand Price QD Bell Bottoms 1975 QD Bell Bottoms 2012 $8 $10 $18 $25 $35 Create a graph depicting the shift of demand

Warm Up- 12/5/14 The overall economy is doing very well. Create ONE demand schedule and graph depicting how demand will be affected by the good economy. (income changes demand) HERE IS WHAT YOU DO: List prices for refrigerators. List QD for each price 2007 with bad economy. List QD for each price in 2014 with good economy. Then graph both curves and explain the change.

Change in Demand CHANGE IN DEMAND = NO PRICE CHANGE OTHER FACTORS CHANGE DEMAND… INCOME TASTES RELATED PRODUCTS

Price of Related Products Change in price of related products changes demand Substitutes Butter v. margarine Compliments Pancakes and syrup Substitutes Prices goes UP QD goes DOWN Substitute goes UP Complimentary Price goes UP Complimentary Goes DOWN

Practice Name a product that you recently bought because it went on sale. Identify at least one substitute for the product and a complimentary if possible. What happened to your demand for the substitute good when you purchased the sale item? What happened to your demand for the complimentary item when you purchased the sale item? Distinguish between a change in quantity demanded and a change in demand.

Warm Up: December 8 Newspaper headline: “GAS PRICES ARE EXPECTED TO DROP TO $2” Determine what change in demand (not change in QD) would occur and explain WHY. Think about things other than QD of gas that would be demanded…. Write it out in a statement Create a general graph showing the shift of the demand curve and write a brief explanation of the reason for the shift.

Marginal Utility The EXTRA usefulness or satisfaction a person gets from acquiring one more unit of a product. Amount added “at the margin” 1 cup of hot cocoa after playing in the snow vs. 2 cups When you reach saturation you stop buying – your marginal utility is less than then the price is worth

Diminishing Marginal Utility Too much hot cocoa makes your want it less….your marginal utility is diminishing or going down The more units a person acquires the less eager they are to buy more Demand decreases

Lesson Learned… Marginal Utility- demand for product up to the point of its usefulness Diminishing Marginal Utility- too much of a good thing decreases usefulness therefore decreases demand. All in moderation 

Warm Up- 12/9/14 Reflect on yesterday’s menu planning and food shopping experience. What were choices you were forced to make when PRICE became a determinant of your demand? What did you discover about the cost of healthy, fresh food vs. frozen or preserved food?

Demand Quiz Study Group You will be randomly put into a study group A list of items to review will be listed on the next slide Work with your group to design a review study guide that covers all the material. Turn in to earn total 5 points for correct answers on tomorrow’s quiz Focus and work as a TEAM! Use each other and beware of time. Must be completed by end of the class period.

Demand Review Define Demand Law of Demand Change in Demand Demand Schedule and Curve How do you show a change in QD Change in Demand What are three that change demand? How do show each on graph? (shifts for each change) Difference of change in QD and change in demand? Marginal Utility v Diminishing Marginal Utility and connection to demand

Friday

Demand Elasticity Used to indicate the extent to which changes in price cause changes in the quantity demanded Elastic demand = small change in price has large change in QD Inelastic demand= change in price causes small change in QD

ELASTIC Demand Usually wants and not needs Price increase or decrease will show noticeable change in QD Example: T-bone steaks Price drop from $6.oo/lbs. to $3.00 will increase demand

INELASTIC Demand QD Price Usually needs When price changes QD remains constant Ex. Price of table salt decreases, QD will not really change

Specific v. General Market Depending on market size – a product can be elastic or inelastic Specific markets= more elastic Local gas station= high gas prices, low QD General markets= less elastic All gas stations= high gas prices, QD constant

Elasticity Practice Create your own example of a product that can be sold in the specific and general markets and explain the affect on demand elasticity.

Determinants of Demand Can the Purchase be Delayed Medicine vs. Twinkies Are Adequate Substitutes Available? Chick Fil A Waffle Fries v. McDonald’s French Fries Does the Purchase Use a Large Portion of Income? New car vs. Mc Donald’s Strawberry Shake

QUIZ on MONDAY Work with your team to review.

Monday