What Is Demand?

What makes you want to buy a product? Popularity of the product, consumer tastes, trends, price of product. What encourages consumers to buy more of a product? LOWER PRICES!

Demand Curve: Demand Schedule Graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time. Demand Schedule Shows various quantities demanded of a particular product at all prices that might prevail in the market at a given time.

Demand How does price affect the number of DVDs people are willing to buy? The higher the price, the fewer DVDs people are willing to buy

What is the relationship between the price of an item and the quantity demanded? Main Ideas of Demand: Demand depends on two variables: the price of a product and the quantity available at a given point in time. In general, when the price of a product goes down, people are willing to buy, or demand, more of it. When the price goes up, they are willing to buy less. A demand curve shows the quantity of a product demanded at each price that might prevail in the market.

What happens to quantity demanded when the price increases? The Price of Burritos What happens to quantity demanded when the price increases? Quantity demanded decreases when the price increases What happens when the price decreases? Quantity demanded increases when the price decreases

REMEMBER!!!  Demand is the desire, ability, and willingness to buy a product; all of these tend to increase as the price decreases. With few exceptions, desire and ability or willingness to buy a product decrease if the price increases

Law Of Demand Why do economists think of demand as a “law”? The Law of Demand states that the quantity demanded of a product varies inversely with its price. The Law of Demand is called a “law” because it has proven true after repeated studies and tests, and it is consistent with common sense and observation. A market demand curve shows the quantities of a product demanded by everyone who is interested in purchasing it at all possible prices.

Individual Demand Curve If both of the individual curves slope down, what should the market curve do? 

Market Demand Curves A: The market curve will also slope down, because it is an average of the data used to create the two individual curves.

How does the market demand curve reflect the Law of Demand? The market demand curve shows the quantities demanded by everyone who might want to purchase a product. It shows how the Law of Demand works in relation to prices and quantity purchased.

Activity How many cans of soda would you buy at… $.25 $.50 $.75 $1.00

What effect do changes in price have on the quantity demanded for soft drinks?

Demand and Marginal Utility How does the principle of diminishing marginal utility explain the price we would be willing to pay for another unit of a good or service? Marginal utility is the extra satisfaction or additional usefulness obtained by acquiring multiple units of a product. As we use more and more of a product, the extra satisfaction we get from using additional quantities begins to decline; this is known as diminishing marginal utility. Because of diminishing marginal utility, people are not usually willing to pay as much for the second, third, or fourth unit as they did for the first unit.

So… How does the principle of diminishing marginal utility explain the price we pay for another unit of a good or service? As we consume more and more of something, we get less additional satisfaction out of each additional amount we consume. Getting less satisfaction decreases our willingness to pay as much for another unit.

What problems might economists have in trying to measure marginal utility? Marginal utility is difficult to measure because it is subjective. If 20 people were asked how much satisfaction they received from a second soft drink, for example, each one might give a different answer.

Write a reflection paragraph describing two different decisions they made regarding purchases: one decision to buy a product, and one decision not to buy a product. Have them explain what affected their decisions: price, need, utility, or other factors.