UNIT VI – Fundamentals of Economics Demand UNIT VI – Fundamentals of Economics

For Demand to Exist… Want goods and/or services Willing to buy Ability to buy

Law of Demand If price is high; demand is low If price is low; demand is high

Demand Schedule Table that lists the various quantities of a product/ service that someone is willing to buy over a range of possible prices Demand Schedule Price Quantity $10 1 $6 2 $2 10

Demand Curve $10 $8 $6 $4 $2 Price 2 4 6 8 10 Quantity Demanded

Market v. Individual Demand Individual – demand of one consumer Market – total demand of all consumers

Changes in Demand Number of consumers (market size) Income of consumers Consumer tastes Consumer expectations (quality and future price) Substitute Goods - Competing products If price of one increases; demand of the other increases Papa John’s v. Pizza Hut Complementary Goods - Demand in one causes demand in other Ketchup and Mustard CD player demands CDs

Diminishing Marginal Utility Utility – pleasure, usefulness, or satisfaction we get from a product/service Will vary from person to person Utility will decrease as more units are consumed/bought Example: eating too much pizza or a fad getting old

Showing changes in demand on the curve…

Elasticity of Demand All goods and services are not affected equally by changing factors Demand elasticity – the extent to which a change in price causes a change in the quantity demanded

If a good or service is elastic, its demand changes greatly due to price changes Candy – price goes up, demand will go down If a good or service is inelastic, its demand does not change greatly due to price Gasoline – prices go up, demand remains relatively the same