The Law of Demand

Supply and Demand https://www.youtube.com/watch?v=g9aDizJpd_s

Definition of Demand The desire to have some good or service and the ability to pay for it.

Law of Demand States that when prices go down, quantity demanded increases. When prices go up, quantity demanded decreases.

*Demand Schedule vs. Market Demand Schedule Demand Schedule- a listing of how much of an item an individual is willing to purchase at each price. Market Demand Schedule- a listing of how much of an item all consumers are willing to purchase at each price.

Law of Diminishing Marginal Utility States that the marginal benefit of using each additional unit of a product during a given period will decline. Ex: Glasses of lemonade on a hot day.

*Substitution effect The pattern of behavior that occurs when consumers react to a change in the price of a good or service by buying a substitute product- one whose price has not changed and that offers a better relative value. Example: Paperback books and magazines.

Elasticity of Demand Elasticity of demand is the measurement of how responsive consumers are to price changes. Elastic- if the quantity demanded changes significantly Inelastic- if the quantity demanded changes little

Inferior Goods vs. Normal Goods Inferior Goods are goods that consumers demand less of when their incomes rise. Ex: Discount clothing, used books, and generic food products. Normal Goods are goods that consumers demand more of when their incomes rise.

What causes demand change? Income- increased income means consumers can buy more. Market Size- A growing market usually increases demand. Consumer Tastes- The popularity of a good or service has a strong effect on the demand for it. Consumer Expectations- What you expect prices to do in the future can influence your buying habits today.

Substitutes & Complements Substitutes are goods and services that can be used in place of each other. Hardback books vs. Paperback books Complements are goods that are used together, so a rise in demand for one increases the demand for the other. CDs and CD players

*What causes a change in Demand? Complements- when the use of one product increases the use of another product. Substitutes- Goods and services that can be used instead of other goods and services.

Crash Course 1/2 https://www.youtube.com/watch?v=LwLh6ax0zTE

Demand Activity Partner Up! Turn to page 113

Demand Activity Instructions Each group of students will have 2 factors that cause a change in demand. Groups will brainstorm scenarios that show how their factors affect the demand for their product(s). Groups can illustrate their ideas in a form such as pictures, cartoons, or diagrams. Be sure to provide text that explains what you drew and why you chose to draw it.