CONTEMPORARY ECONOMICS: LESSON 4.1 Learning Objective: Today I will be able to explain the law of demand by interpreting price changes on advertisements. Agenda: Learning Objective Lecture: Ch. 4.1 Demand Curve Price Changes on Advertisements Exit Slip CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Once recreational use of marijuana was legalized in the state of Colorado, how did it change the demand for marijuana? How might this marijuana shop be a monopoly within the city of Breckenridge ? Analyze how is it Cannabis meets capitalism? CONTEMPORARY ECONOMICS: LESSON 4.1

Title Notes: Ch. 4.1 Demand Curve CONTEMPORARY ECONOMICS: LESSON 4.1

Demand: Consumer willing & able to buy. indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant. Law of Demand The relationship between price & quantity demanded. Higher the price, the less quantity demanded, vice versa. Quantity demanded varies inversely with price, other things constant. .

CONTEMPORARY ECONOMICS: LESSON 4.1 Law of Demand Demand, wants, and needs  Consumer demand and consumer wants are not the same thing. CONSUMER WANT vs CONSUMER DEMAND CONTEMPORARY ECONOMICS: LESSON 4.1

I might be willing to buy certain things…

But, am I able to buy them?

CONTEMPORARY ECONOMICS: LESSON 4.1 Law of Demand Substitution effect Change in price of a good changes demand of similar goods– causes the substitution effect. CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Cereal CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Law of Demand Income effect Real income – that is, your income measured in terms of how many goods and services it can buy. CONTEMPORARY ECONOMICS: LESSON 4.1

The satisfaction you get from a second pizza is your marginal utility of that pizza

CONTEMPORARY ECONOMICS: LESSON 4.1 Marginal Utility: Satisfaction derived from additional unit of product. The Law of Diminishing Marginal Utility – the more goods consumed per period, the less you consume. The smaller total utility (satisfaction) increases from consuming one more unit, other things constant. CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1  Law of Demand Diminishing marginal utility (Continue) The law of diminishing marginal utility helps explain why people buy more when the price decreases. CONTEMPORARY ECONOMICS: LESSON 4.1

Explain the law of demand in your own words. Checkpoint Pg. 105 Explain the law of demand in your own words. CONTEMPORARY ECONOMICS: LESSON 4.1

Demand Schedule and Demand Curve When you describe demand, you must specify the units being measured & time being considered. Units: is 1 item/product Ex. 13 units of pizzas= 13 pizzas. CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Demand Schedule Price Quantity Demanded per Pizza per Week (millions) a $15 8 b 12 14 c 9 20 d 6 26 e 3 32 . The schedule (chart) lists possible prices, along the quantity demanded at each price. CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Demand Curve 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 Price per pizza a b c d e . The curve (line) on the graph that shows the points or relationship between the quantity demanded at each price. D CONTEMPORARY ECONOMICS: LESSON 4.1

CONTEMPORARY ECONOMICS: LESSON 4.1 Demand Curve for Pizza 8 14 20 26 32 Millions of pizzas per week $15 12 9 6 3 Price per pizza The demand curves slopes downward, reflecting the Law of Demand : Price and quantity demanded are inversely, or negatively, related, other things constant. a b c d e D CONTEMPORARY ECONOMICS: LESSON 4.1

Demand Schedule and Demand Curve Demand versus quantity demanded An individual point on the demand curve shows the quantity demanded. Demand, is not a specific quantity, but the entire relation between price and quantity demanded. CONTEMPORARY ECONOMICS: LESSON 4.1

Demand Schedule and Demand Curve  Demand Schedule and Demand Curve Individual demand and market demand The market demand curve shows the total quantity demanded per period by all consumers at various prices. CONTEMPORARY ECONOMICS: LESSON 4.1

Individual Demand for Pizzas $12 8 4 Price 1 2 3 Pizzas (per week) (a) Hector $12 8 4 1 2 (b) Brianna $12 8 4 1 (c) Chris d H d B d C CONTEMPORARY ECONOMICS: LESSON 4.1

Market Demand for Pizzas $12 8 4 Price 1 2 3 Pizzas (per week) (d) Market demand for pizzas 6 d H B C D + = CONTEMPORARY ECONOMICS: LESSON 4.1

Demand Schedule and Demand Curve  Demand Schedule and Demand Curve Individual demand and market demand The market demand is simply the sum of the individual curves for all consumers in the market. CONTEMPORARY ECONOMICS: LESSON 4.1

What do a demand schedule and demand curve show? Checkpoint Pg. 107 What do a demand schedule and demand curve show?  ? CONTEMPORARY ECONOMICS: LESSON 4.1

Price Changes on Advertisements CONTEMPORARY ECONOMICS: LESSON 4.1

Price Changes on Advertisements Step 1: Find an example of a business that recently raised or lowered prices. (ONLINE/GROUPON/NEWSPAPER/ADS) ___________________________________ Step 2: Answer questions Did it increase or decrease? About how much did the price change? How will the price change affect consumer demand of the product in the following areas: Law of Demand: Income Effect: Substitution Effect: Diminishing Marginal Utility:

CONTEMPORARY ECONOMICS: LESSON 4.1 Exit Slip Identify a good OR service you consumed in the past that has made you follow the law of demand. Explain in what ways did you follow the law of demand. CONTEMPORARY ECONOMICS: LESSON 4.1