Economics Chapter 4: Demand.

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Presentation transcript:

Economics Chapter 4: Demand

Today’s Agenda Begin Chapter 4 Demand Homework Complete Questions 1-7 by Friday

By the end of this lesson, I “demand” that you be able to: Define Demand Define elasticity and inelasticity Explain what factors affect demand Define diminishing marginal utility

What is Demand? Amount of a good or service that consumers are willing and able to buy Influenced by Price Consumers willingness to sacrifice Income Consumer must be able to afford it Substitution Alternate good or service available Taste Consumer must like the good or service

What does the Law of Demand say? When price goes UP, demand goes DOWN When price goes DOWN, demand goes UP Demand Curve Economic model illustrating law of demand

What is the elasticity and inelasticity of demand? Elastic Demand State in which a price increase has a major impact on demand Rise in price of Doritos will greatly affect demand Inelastic Demand State in which price increase has little impact on demand Rise in price of gasoline will not greatly affect demand

Factors that Decide if Demand is Elastic or Inelastic Luxury or necessity Luxury – want that is nice but not necessary smartphone*, Camaro, tanning salon, shore house Highly elastic demand Necessity- needed to live Food, water, shelter, healthcare inelastic demand Substitutions Can the good or service be replaced with something else Instead of Doritos, Fritos Something easily substituted is highly elastic Consumer Income How much money consumer makes affects demand

Is this Hollister shirt elastic or inelastic? Explain why.

Today’s Agenda Finish Chapter 4 Slide Show Complete Crossword Puzzle Review Quiz on Chapter 3-4 next week (Wed or Thursday)

Review What is the term for the amount of a good or service that consumers are willing and able to buy? What is the term for demand in which a change is price greatly affects demand? What is the term for demand in which a change in price does not affect demand?

What factors cause demand to change? Income More income allows more demand Substitution if there is an alternate Coke: Pepsi Comcast: Verizon Bottled Water: Tap Water Weather Winter Storm: Snow shovels, salt Summer time: Sunglasses, shorts Population More people means more demand Finding a hotel room during 4th of July down the shore Taste What consumers like changes Cigarettes, cassette players Utility More useful/satisfying a product the greater its demand

What is Diminishing Marginal Utility? Usefulness and satisfaction consumer gets from product More utility greater the demand The more you like something, the more you are willing to pay! Diminishing Marginal Utility Point at which satisfaction decreases with each additional Eventually each additional products is less satisfying

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