+ Demand Chapter 4 Sections 1 & 2 What is Demand? What Factors Affect Demand?

+ Demand The Law of Demand Demand-The desire for an item and the ability to pay for it Law of Demand-When the price of good or service goes up, quantity demand goes down and when price of good or service goes down, quantity demand goes up Example Law of demand explains consumer behavior as well as economic concept Spend $45 on DVDs $15 each gets 3 $5 each gets 7 Demand is the willingness to buy a good or service and the ability to pay for it

+ Demand Schedules Demand Schedule- a table that summarizes one consumer’s behavior List how much of an item an individual will buy at each price Market Demand Schedule- A table that summarizes all consumers’ behavior List how much of an item all consumers will buy at each price

+ Demand Schedules Demand Schedule is a 2- column table Left handed side list various prices of a good or service Right handed side gives quantity demanded at each price DVD Demand Schedule Quantity demanded and price have an inverse relationship Business owners need information about consumer demand Helps them price good to get the most sales Market Research-gather and evaluate data about customer preferences Market Demand Schedule similar to individual demand schedule Except quantities demanded are larger Market demand also depends on price Example: Individual Demand Schedule Example: Market Demand Schedule

+ Demand Curves Demand Curve-A graph that shows amount of an item a consumer will buy at each price Market Demand Curve-Amount all consumers will buy at each price Demand curves graphically show information found on demand schedules

+ Demand Curves Demand curve is a visual representation of law of demand Assumes all factors are the same Vertical axis shows prices Horizontal axis shows quantities demanded Demand curve slope down from upper left to lower right Same as individual curve Includes all consumers of a product Inverse relationship between price and quantity demanded Individual Demand CurveMarket Demand Curve

+ What Factors Affect Demand? Law of Diminishing Marginal Utility-marginal benefit of each additional unit declines as each unit is used Income Effect-amount people buy changes as purchasing power of their income changes Substitution Effect-amount people buy changes as they buy substitute products Change in Quantity Demanded-changes because of price, changes are on demand curve, does not shift the curve itself

+ Change in Demand Change in Demand-caused by a change in the marketplace Prompts different buying amounts Shift in demand 6 Factors

+ Change in Demand Factor 1-Income Change in income Normal Goods-demand more when income goes up Inferior Goods-demanded less when income goes up Factor 2-Market Size Numbers of consumers change Factor 3-Consumer Tastes Changes in Tastes Factor 4-Consumer Expectations Expected price changes can change demand Factor 5-Substitutes Products used in the place Factor 6-Complements Complements-Goods that are used together

+ Vocabulary DemandThe desire for an item and the ability to pay for it Law of DemandWhen the price of good or service goes up, quantity demand goes down and when price of good or service goes down, quantity demand goes up Demand Schedule a table that summarizes one consumer’s behavior, lists how much of an item will be bought at each price Market Demand Schedule A table that summarizes all consumers’ behavior, lists how much of an items all consumers will by at each price Demand CurveA graph that shows amount of an item a consumer will buy at each price Market Demand Curve Amount all consumers will buy at each price Law of Diminishing Marginal Utility Marginal benefit of each additional unit declines as each unit is used

+ Vocabulary Income Effectamount people buy changes as purchasing power of their income changes Substitution Effect amount people buy changes as they buy substitute products Change in Quantity Demanded changes because of price, changes are on demand curve, does not shift the curve itself Change in Demand caused by a change in the marketplace Normal Goods demand more when income goes up Inferior Goods demanded less when income goes up ComplementGoods that are used together