DEMAND CHAPTER 20, SECTIONS 1 & 2

WHAT IS DEMAND? Demand – the desire, willingness and ability to buy a good or service Demand Schedule – a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices Demand Curve – a graph that shows the amount of product that would be bought at all possible market prices

WHAT IS DEMAND? Law of Demand – quantity demanded and price move in OPPOSITE directions Market Demand – the total demand of all consumers for their product or service

DEMAND ILLUSTRATED

DIMINISHING MARGINAL UTILITY Diminishing Marginal Utility – the principle that our additional satisfaction (marginal utility) tends to go down as more and more units are consumed

CHANGES IN DEMAND Changes in the number of consumers

CHANGES IN DEMAND Changes in consumers’ income

CHANGES IN DEMAND Changes in consumers’ tastes

CHANGES IN DEMAND Changes in consumers’ expectations

CHANGES IN DEMAND Changes in substitutes – competing products that can be used in place of one another

CHANGES IN DEMAND Changes in complements – products that are used together

CHANGES IN DEMAND Shift (increase) in demand for Oreo Cookies

ELASTICITY OF DEMAND Demand elasticity – the extent to which a change in price causes a change in the quantity demanded

DEMAND ELASTIC Products are usually demand ELASTIC when there are numerous, competitive substitutes

DEMAND INELASTIC Price changes have very little effect on products that are demand INELASTIC (few or no substitutes)