Unit 9, Lesson 1: Demand Agenda: ORCA Go over “Demand” notes Exercise - Demand curves Outcome: Students will explain the demand curve For economic headline examples.

What Is Demand? Demand: desire, willingness, and ability to buy a good or service For demand to exist: 1- a consumer must want the good or service 2- a consumer must be willing to buy that good or service 3- a consumer must have the resources available to buy it Law of demand: quantity demanded and price move in opposite directions; as price goes up, demand goes down; as price goes down, demand grows up

Factors Affecting Demand There is individual demand and market demand in our economy; which are business more concerned with Changes in the number of consumers: the more consumers, the higher the demand; what can cause this? Changes in consumers’ income: the more money people have the more they can purchase so demand goes up; opposite can also occur Changes in consumers’ taste: if a good becomes popular the demand and the price increase; examples?

Factors Affecting Demand Changes in consumers’ expectations: if people expect financial trouble or gain they can adjust their demand for goods; expectations about goods can also effect demand Changes in Substitutes: Demand for a product can be affected by similar products that may be better or cheaper Changes in Complements: if the price of a complimentary good goes up or down it affects the price of those goods: DVD and DVD players Elasticity of demand: extend to which a change in price causes a change in quantity demanded: elastic vs. inelastic

Write the following on the back of your outline in the blank space:

Demand Shifters: T - I - R - E - S - Income of Consumers Tastes & Preferences of Consumers Income of Consumers Related Goods: Substitutes & Complements Expectations of Future Price Changes Size of population/Market I - R - E - S -

Tastes & Preferences of Consumers As people’s tastes change in favor of a good, or an effective advertising campaign has been waged, demand increases (shifts to the right). As people’s tastes change against a good, or a good loses popularity, demand decreases (shifts to the left). P Q D D1 P Q D1 D

Example: When Michael Jordan began endorsing the products, demand for Nike & Gatorade increased.

Income of Consumers As income increases, consumer demand for goods and services increases (shifts to the right). As income decreases, consumer demand for goods and services decreases (shifts to the left).

Example: When Billy got laid off from his job, his demand for gourmet steak dinners decreased.

Related Goods: Substitutes Substitute goods can be easily used in place of one another. If two goods are SUBSTITUTES, when the price of Good A increases, demand for Good B increases (shifts to the right). If two goods are SUBSTITUTES, when the price of Good A decreases, demand for Good B decreases (shifts to the left).

Example: Demand for Starbucks changes when Caribou alters its prices

Related Goods: Complements Complementary goods are used WITH each other. If two goods are COMPLEMENTS, when the price of Good A increases, demand for Good B decreases (shifts to the left). If two goods are COMPLEMENTS, when the price of Good A decreases, demand for Good B increases (shifts to the right).

Example: Demand for ketchup changes when hamburger prices fluctuate

Substitute OR Complementary? Cars and Tires Corn and Beans DVD Players and DVD’s Natural Gas and Electricity Cereal and Milk Toast and Jam Sweatshirts and Sweaters

Expectations of Future Price Changes If consumers expect the price of a good to rise in the future, immediate demand increases (shifts to the right). If consumers expect the price of a good to decrease in the future, immediate demand decreases (shifts to the left).

Example: Demand for gas changes throughout the week

Size of Population/Market As the number of consumers in a given market increases, demand increases (shifts to the right). As the number of consumers in a given market decreases, demand decreases (shifts to the left).

Example: Demand for girl scout patches increases when more girls join girl scouts

Elastic v. Inelastic A good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life. Example: Prices of certain luxury cars increase, people will avoid buying those specific cars and buy a car that fits their income. *A price increase of a good or service that is considered less of a necessity will deter more consumers because the opportunity cost of buying the product will become too high. On the other hand, an inelastic good or service is one in which changes in price witness only modest changes in the quantity demanded or supplied, if any at all. These goods tend to be things that are more of a necessity to the consumer in his or her daily life. Example: If Thanksgiving turkey prices increase, people will still continue to buy the turkey for Thanksgiving, no matter the cost. *Products that are necessities are more insensitive to price changes because consumers would continue buying these products despite price increases.

DEMAND # Demanded # Demanded $ $ Quantity demanded : the amount of a good that buyers are willing and able to purchase. Law of Demand The quantity demanded of a good falls when the price of the good rises and vice versa. $ # Demanded # Demanded $ OR

On your worksheet… Read the headline and determine if the quantity demanded would increase or decrease. Draw what will likely happen to the demand curve (it may change or stay the same). Explain what happened to the demand curve & why. Cite & underline the shifter (TIRES), or explain why the curve did not shift, and whether quantity demanded increased or decreased. Wages Decline for U.S. Workers -Demand decreased (shifted left) -Income of consumers decreased D2