The Demand Curve and Elasticity Chapter 7 Section 2 Notes The Demand Curve and Elasticity

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Demand Schedule Table showing quantities demanded at different possible prices.

Demand Curve Downward-Sloping line that shows in graph form the quantities demanded at each possible price.

KEEP IN MIND A change in quantity demanded (Is NOT the same as ) ≠ a change in demand.

Determinants of Demand Factors that affect demand for a specific product or service. Change in taste & preferences Substitute Goods Complementary Goods Change in Population Change in Income

Cont. Changes in Taste & Preferences Change in Population Change in Income

Cont. Substitute Goods – Goods that can be used in place of another good. Complementary Goods – Goods that go hand in hand (Generally bought and sold together for joint use).

Change in Demand vs. Quantity Change

Increase in Population

Decrease in Income

Substitute Goods

Complementary Goods

The Price Elasticity of Demand Elasticity – Economic concept dealing with consumer’s responsiveness to an increase or decrease in the price of a product. Elasticity of Demand – How much the demand varies according to changes in price.

Elastic Demand Situation in which a given rise or fall in product’s price greatly affects the amount that people are willing to buy. These are goods that usually have many substitutes or they are luxury goods. Example – Red Bull, an iPod.

Inelastic Demand Situation in which a product’s price change has little impact on the quantity demanded by consumers. These are goods that are necessities or have no or very few substitutes Example – A medication you have to have or Gasoline