Factors of Demand

Marginal Cost & Benefit in Demand The cost of using one more unit of a good or service. Marginal Benefit The benefit or satisfaction received from using one more unit of a good or service. Law of Diminishing marginal utility: the benefit of using an additional unit of a product during a given period will decline. Example: Glass of lemonade on a hot day. 1st glass is very refreshing. Is the 2nd class as refreshing? 3rd?

Demand Curves Movement vs. Shift Movement along the curve is because of change in price Price ↑ = ↓ Quantity Demand Price ↓ = ↑ Quantity Demand Shift occurs because of any change other than price. Raise at work = ↑ Quantity Demanded Got fired = ↓ Quantity Demand

Change/Movement in quantity demanded. Movement in quantity demanded happen because of a change in price. We assume that all other factors have not changed, just the price. Same income, same desire for the good. Example: Pizza The price of pizza decreases from $1.00 to $0.50. You will buy more pizza increase in the quantity demanded of pizza. The decreasing price of a good (pizza) increases your purchasing power. The price of pizza increases from $1.00 to $2.00. You will buy less pizza decrease in the quantity demanded of pizza. The rising price of a good (pizza) diminishes/decreases your purchasing power.

Shift in quantity demanded A shift in demand occurs when we no longer hold other things (changes in your income, change in your tastes/style/fads, the price of substitute goods, etc.) constant. Shifts occur for any reason other than price. Example: Candy. You love candy, but you just got fired from your job. Your QD for candy decreases and shifts downward. 6 different reasons for shifting demand