Introduction To Demand The basic foundations to Economics!

Your Homework Where is your news article? What ‘news’ did you choose? What ‘economic’ concepts did you think it covered? How to ‘write up’ your analysis… 5/23/2019

Return of your homework… Attainment Effort grade 10 – 9 Significantly above standard. Near perfect work A Outstanding effort. Lots of time and quality work presented. 8-7 Completed in full, with a few discrepancies. B You have put in the correct amount of time and effort 6-5 You have attempted all sections. However, you appear to have misunderstood the task. C This is only just acceptable. You have put some time and effort, although more thought and care is needed next time. 4-3 There is work missing in what was submitted. D This is disappointing. You can do much better than this. Make sure that you spend the correct quality time on your homework. 2-1 You have not understood the work. Significant errors or sections not attempted. U The piece of work has to be redone! 5/23/2019

Snickers game… What happens to demand if prices increase? What happens to demand if incomes increase? What did the concept of Elasticity mean? If a product has an elasticity of 0.6 what would be the change in Demand if price went up by 10%? If a product has an elasticity of 3.5 what would be the change in Demand if price went up by 10%? 5/23/2019

What is demand? The quantity of a product consumers are willing and able to buy at different prices in a specified time period 5/23/2019

Demand & Price relationship Normally there is an inverse relationship between the price of good X and the quantity demanded of good X In other words…. If the price of a good increases – people usually demand less! If the price of a good falls – more people might buy it …… who can resist a sale? 5/23/2019

Factors that affect demand? Get your white board ready… Factors that affect demand? Spanish villa What would make consumers buy MORE of these goods? 5/23/2019

Factors that affect demand Consumer tastes and preferences Income available to the consumer Prices of other goods and services Substitute goods Complementary goods Interest rates Consumer population 5/23/2019

Different types of demand 4 types…. For you to learn!

What effective demand can you fulfil this weekend? When a consumers' desire to buy a product is backed up by an ability to pay for it Consumers must have sufficient real purchasing power What effective demand can you fulfil this weekend? 5/23/2019

Effective demand Demand is only effective if backed up with an ability to pay for the product 5/23/2019

So how does anyone ‘fulfil’ latent demand? Latent demand exists when there is willingness to purchase a good, but where the consumer lacks the real purchasing power to be able to afford the product Latent demand is affected by persuasive advertising – where the producer is seeking to influence consumer tastes and preferences So how does anyone ‘fulfil’ latent demand? 5/23/2019

Latent demand – what are your desires? 5/23/2019

Derived demand Also known as joint demand The demand for a product X might be strongly linked to the demand for a related product Y 5/23/2019

Bricks?????? …..no one really wants bricks…. But who would have a derived demand for them… and what are they used for? 5/23/2019

Derived demand Increase in demand for Use of cars …petrol Leads to an increase in derived demand for… Use of cars …petrol Cinema tickets bread New houses to be built 5/23/2019

Complementary demand If there is an increase in demand for good X there will be more of good Y also being bought E.g. if there is an increase in the demand for beefburgers …. There will also be an increase in demand for burger buns! 5/23/2019

Complementary demand Increase in demand for Guns??? PC printer??? Leads to an increase in complementary demand for… Guns??? PC printer??? Mobile phones??? Bread??? 5/23/2019

Income & substitution effects Changes in price …. Income & substitution effects

What happened when the price of snickers increased? Most of you had a substitution effect! A few of you had an income effect! But what does this mean? 5/23/2019

Income effect Substitution effect; price increase = you switch to cheaper alternatives i.e. you ration spending or ‘do without. Income effect; prices increase = you can’t afford as much therefore purchasing power is less 5/23/2019

Your tasks… On your whiteboard…. On one side write RISE On the other write FALL Then be prepared to decide what the effect of the following will have on demand. 5/23/2019

What if….. Price of newspaper increases…..? What’s the effect on demand? What if….. Price of newspaper increases…..? Substitutes products prices increase? Incomes fall – what will be the effect on ‘normal’ goods? The product has a major advertising campaign? Science proves that regular mobile phone use damages memory! 5/23/2019

Individual work Complete worksheet D:\How the market works\Worksheets\1. Demand.doc 5/23/2019

The answers… D:\How the market works\Answers\1. Demand_A.doc 5/23/2019

Demand in the News Nigella effect sees goose fat sales soar! Sales of digital televisions top analogue sets 5/23/2019

Homework Complete worksheet 2…. D:\How the market works\Worksheets\2. Shifts in demand.doc 5/23/2019

Plenary What type of relationship is there between price and demand? What are the 4 different types of demand? Effective Latent Complementary Derived 5/23/2019