demand How badly we want stuff

demand Left: Demand Schedule Right: Demand Curve Demand: the desire, willingness, and ability to buy a good or service. A demand schedule is a table that shows how much of a product will be sold at various prices. A demand curve is a graph that shows demand at all possible prices.

demand The Law of Demand states that demand tends to decrease as the price of the good increases. To see this in real life, think about how people tend to rush out to purchase an item when there is a sale. Market Demand: the total demand of all consumers for a product or service. (as opposed to individual demand, which is just for one consumer)

Marginal utility Utility is the satisfaction and usefulness we receive from a product or service. Marginal utility is the added satisfaction of gaining one more of the good or service. Marginal utility tends to decrease as we receive more units. Ex: You enjoy the first chicken nugget a lot! The 48th chicken nugget, not so much. You might give your friend $2 in exchange for some of their chicken nuggets, but you wouldn’t give them $50 for 25 packs of nuggets.

Change in demand v. change in quantity demanded Only a change in price can affect the amount of a product that is demanded without changing the entire demand curve. Be careful! This can/will trip you up! Next we’ll see some factors that can change the demand curve!

Factors that shift the entire demand curve Changes in Population The only gas station in a town with 8 people would have less demand than the only gas station in a town with 50,000 people. Changes in Income If you lose your job, you’re much less likely to buy a Lamborghini.

Factors that affect demand Changes in Taste If everyone in Mooresville decides to become vegan, demand for Chick-fil-a will decrease drastically. Changes in Expectations (how you think about the future) If you hear the iPhone 15 is coming out next month, you may be less likely to upgrade to the iPhone X now.

More: price of related goods Changes in Substitutes A Substitute is a comparable good that serve the same purpose. Ex: You might not buy butter because margarine is cheaper. Changes in Complements A Complement is an item usually purchased alongside a good. Ex: If there is a sale on hot dogs, the demand for buns will increase.

Demand elasticity: How much quantity demanded is likely to change when price changes. High Elasticity: When there are good substitutes for a product, consumers are more likely to switch. Ex: iPhone 8 and iPhone X Expensive items usually have high elasticity because its high price makes people less willing to pay even more. If buying an item can be postponed, demand will be more elastic. Ex: “I have food in my fridge. I don’t want to pay $6 for a burger right now.”

Low elasticity Price changes have little effect on the quantity demanded. Time-Sensitive: People will pay a lot more money for a Turkey at Thanksgiving. Items with patents or no substitutes: utilities and many medicines Medicine and food often have low elasticity because they are necessities. These are things you can’t cut back on very much. Luxuries like sports cars and spa trips have high elasticity because they can be easily cut out of a budget when money is tight.