Factors of Demand, 2/11 Warm Up Martha Navarro-Baldoza is at Sprinkles Cupcakes to buy treats for her classmates. She has $50 to spend. Each cupcake is $3! At that price she is likely to buy 10. However, there are two other deals to choose from. 20 cupcakes for $40 and 30 cupcakes for $50. – Create a demand schedule – Create a demand curve

The math Individual cupcakes- – $3 each Deal #1 20 cupcakes for $40- – $2 each Deal #2 30 cupcakes for $50- – $1.67 each

Martha’s Demand Schedule PriceQuantity Demanded $310 $220 $ Price Qty Demanded $0 $1 $2 $

Martha’s dilemma But wait, after some thinking… Martha remembers there’s a party tonight and she needs to provide punch

Do the math Martha! She does some quick math and decides she should only spend about $25 on cupcakes for 15 of her closest friends How much would 15 cupcakes cost her? – $45

The other guys “WHAT A RIP OFF!” she says. One block down is Tinkles Cupcakes. They use the same ingredients as Sprinkles but their cupcakes are only $0.75 each...

The Substitution Effect After this thought process, does she still have a demand for Sprinkles Cupcakes? Explain. – No, she is able to buy Sprinkles Cupcakes but she is no longer willing Goods and services that can be used in place of other goods and services to satisfy consumer wants are called substitutes

Smart Shopper So, Martha walks a block to Tinkle’s Cupcakes She buys 15 cupcakes at $0.75 each How much money did she save? – $45 – 15($0.75)= $33.75 She’s got some money to burn… OHHHHH YESSSSS!!!

Income Effect The change in the amount of a product that a consumer will buy because the purchasing power of his or her income changes

Complements “Great heavens!” she exclaims, “There’s milk too.” $0.50/carton. That milk is complementary to her cupcakes DAT MILK

Complements Compl i ment- “Your eyes shine like the stars.” Compl e ment- “Cupcakes and milk.”

BAD GIRLS! Martha’s friends didn’t show up to school because there was some silly parade… ahem* What’s she going to do with 15 cupcakes? – Being economical, she’s going to sell them!

I can haz cupcakes? Ms. So eats 1 cupcake. She buys another. Then another. Then another… She decides she can’t have more than 4

Law of Diminishing Marginal Utility The law of diminishing marginal utility states that the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used

Changes Change in Quantity Demanded- increase or decrease in the amount demanded because of the change in price Movement along the curve itself

Martha’s Demand Schedule PriceQuantity Demanded $310 $220 $ Price Qty Demanded $0 $1 $2 $

Changes Change in demand- occurs when something prompts consumers to buy a different amounts at each price

Martha’s NEW Demand Schedule PriceQuantity Demanded $3 20 $2 40 $ Price Qty Demanded $0 $1 $2 $

Classwork Read pages Outline the 6 factors that change demand 1.Income 2.Market Size 3.Consumer Tastes 4.Consumer Expectations 5.Substitutes 6.Complements Define key terms as you read Finish Part 1 of your Project (from Friday)

Changes in Demand, 2/12 Warm Up (# your warm up 1-6 and write the correct factor of demand for each example) Factor of Demand Example 1.Unemployment just rose to 12% and business owners are cutting their workers’ wages and hours 2. Oh no! Zombies have taken over Europe and Asia and the disease is spreading. Better stock up on that bottled water. 3. Daly City has been overrun by zombies. 90% of the population now does not know how to use their debit card nor do they want to buy what you’re selling. Just want dat brain. 4. Godaddy.com’s recent Super Bowl commercial skyrocketed them to the #1 spot in top online domain name registrars 5. MILK AND COOKIES! 6.Driving too expensive, must take bus

Review: Changes in Demand If factors of demand have a positive effect on your product sales, the demand curve will shift in which direction? – To the right If they have a negative effect? – To the left

Celebrity Endorsement

Brand Recognition

Comparison

Facebook and Other Media Outlets

Sex Appeal

Humor

Demand Elasticity, 2/13 Warm Up 1.How much do you or someone you know spend on gas per month? 2.Why do we still buy gas?

Elasticity of Demand If the change in price of something you want changes the how much you’re willing to buy, your demand for the good is elastic

Elasticity of Demand If the good or service is something you can’t live without and will buy no matter what, the demand is inelastic

Notes: Demand Elasticity 4-3 Outline pages Finish Worksheet for Homework TEST FRIDAY NO BOOK FRIDAY!