Economic Demand Tutorial The purpose of this tutorial is to review the concept of demand in economics. Click on the arrows in the lower right corner to work your way through the tutorial. You can always click the “Home” button to come back to the beginning. Make sure to finish the quiz at the end! For Teachers

Demand Demand is not just simply wanting to own a product. Remember, to have demand, you must have: 1.The desire to own it. 2.The ability to pay for it. 3.The willingness to buy it.

What Demand Can Look Like There are two ways to represent demand. One way is through a demand schedule, which you might think of as a demand chart. Another way is through a graph called a demand curve.

Demand Schedule In a demand schedule or demand chart, we simply list the amount of a product that would be demanded at a variety of prices. According to this demand schedule, when the price is $1, the quantity demanded will be 20. When the price rises to $2, only 15 will be demanded. PriceQuantity Demanded $120 $215 $310 $45

Demand Curve We can also represent demand in a graph called a demand curve. The data from the demand schedule is plotted on a graph. Quantity demanded serves as our X coordinate. Price is our Y coordinate. Example: At $1, the quantity demanded is 20. We can then graph the coordinate pair (20, $1)

Compare the Two Demand Schedule Price Quantity Demanded Point on Graph $120A $215B $310C $45D

Quick Check #1 According to the demand schedule, what is the quantity demanded when the price is $4? (Click your answer below.) 5 10

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Quick Check #2 Check out this demand schedule. Do you notice a pattern? What happens to demand as price goes up? Price Quantity Demanded $ $.5075 $.7550 $ The demand increases. The demand decreases.

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Quick Check #3 Based on what you have learned so far, choose the statement below that is correct: As price goes down, demand goes up. As price goes down, demand goes down.

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Law of Demand As you have already figured out, price has an effect on demand. This is known as the Law of Demand. The Law of Demand states that the demand for a product varies inversely with its price. In other words: – As price goes up, demand goes down. – As price goes down, demand goes up.

Changes in Demand Factors other than price can cause changes in demand These other factors include: 1.Consumers’ income 2.Consumers’ tastes 3.Prices of related products (substitute and complements)

Consumers’ Income Naturally, if your income increases, you will be more able and willing to buy more products at any price. And of course, if your income decreases, you will be less willing and able to buy goods regardless of price.

What would you do? Nike has come out with a new popular line of basketball shoes. Unfortunately, your boss tells you he has to cut back your hours at work so your pay check will be $100 - $200 less this month. Your demand for the new Nike shoes would probably: (Remember, demand is desire, ability, and willingness to buy.) Buy the shoes! Pass on the shoes.

Great choice! Like most consumers, you would cut back on your purchases when your income decreases. – That means a decrease in demand. Let’s see what else can change demand.

Are you sure? Most consumers recognize that when their income decreases, they should cut back on spending. Losing hours at work means you have less money to spend on necessities like groceries, rent, and bills. The shoes might be great, but you should consider saving your money for more important things.

Consumer Tastes Advertising, trends, and even seasons can affect consumer tastes. – Example: Demand for sweaters goes up in the fall and winter. Swimsuits are in higher demand in the spring and summer. Think about Oprah’s Book Club. When Oprah picks a new book for her club, what will happen to the demand for that book? It will increase.It will decrease.

You’re correct! Endorsements from celebrities can definitely increase demand! Let’s move on!

Sorry! Maybe you don’t believe in the power of Oprah’s sway, but celebrity endorsements DO create an increase in demand for a product.

Substitutes Substitutes are product that can be used in place of another. Example: Margarine can be substituted for butter. Increase in the price of one good can cause an increase in demand for a cheaper substitute.

Complements Complements are goods that go together. – Example: Hot dogs and buns. Decreasing the price of one good increases the demand for its complement.

Quick Check #4 Butter and corn would be considered: Substitutes Complements

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Quick Check #5 Coke and Pepsi would be considered: Substitutes Complements

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Quick Check #6 Peanut Butter is on sale this week. What will happen to the demand for jelly? Demand for jelly will go down. Demand for jelly will go up.

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Quick Check #7 If coffee goes on sale, what will happen to the demand for tea? Demand for tea will go down. Demand for tea will go up.

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Assignment Using the following information, create a demand schedule & graph the demand curve: – If Pistons tickets are $100 each, I will buy one for me and one for my husband. – If the tickets are $50, I will buy four and take my husband and my parents. – If the tickets are $200, I’ll buy my husband a ticket and send him to the game. – If the tickets, are $25, I will be generous and buy eight to take my entire family. Complete your demand schedule and graph on a separate sheet of paper and turn it in. Go back through this tutorial if you need help. For Teachers

Michigan Standards and Benchmarks Met with this Tutorial Law of Demand – E – Explain the law of demand and analyze the likely change in demand when there are changes in prices of the goods or services, availability of alternative (substitute or complementary) goods or services, or changes in the number of buyers in a market created by such things as change in income or availability of credit. Price in the Market – E – Analyze how prices send signals and provide incentives to buyers and sellers in a competitive market.