Demand: Desire, ability, and willingness to buy a product

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Presentation transcript:

Demand: Desire, ability, and willingness to buy a product The law of demand says that as the price of a good rises the quantity of the good consumers are willing and able to buy will decrease Inversely related Low price= High quantity High price= Low quantity Quantity Demanded- The amount of a good that buyers are willing and able to purchase at a given price. (SPECIFIC NUMBER)

Demand Schedule & Curve Demand schedule shows the relationship between the price of the good and the quantity demanded. Demand curve is a graph of the relationship between the price of a good and the quantity demanded

Demand Curve for Ice Cream Cones Price of Ice-Cream Cone $3.00 2.50 1. A decrease in price ... 2.00 1.50 The demand curve slopes downwards from left to right (a negative slope), indicating the Law of Demand. 1.00 0.50 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of 2. ... increases quantity of cones demanded. Ice-Cream Cones

Shifts and Changes in Demand Changes in Quantity Demanded (Qd) If there is a change in PRICE for the product, then there is a change in the QUANTITY DEMANDED (Qd) This causes movement ALONG the demand curve.

Determinants of Demand Change in Demand Income of consumers Number of consumers Substitute price change Expectations Complement price change Tastes or preferences This results in a shift in the demand curve, either to the left or right. Causes a change that alters the quantity demanded at every price.

Shifts in the Demand Curve An increase is always to the right and a decrease is always to the left. Price of Ice-Cream Cone Increase in demand Decrease in demand Demand curve, D 2 Demand curve, D 1 Demand curve, D 3 Quantity of Ice-Cream Cones

Shifts and Changes in Demand cont. A closer look at changes in income Normal Good A good that consumers demand more when their incomes increase Inferior Good demand less when their

Consumer Income Normal Good Price of Hamburgers $3.00 An increase in income... 2.50 Increase in demand 2.00 1.50 1.00 0.50 D2 D1 Quantity of Hamburgers 1 2 3 4 5 6 7 8 9 10 11 12

Consumer Income Inferior Good Price of Spam $3.00 2.50 An increase in income... 2.00 Decrease in demand 1.50 1.00 0.50 D1 Quantity of Spam 1 2 3 4 5 6 7 8 9 10 11 12