CH 4: Demand 4-1: WHAT IS DEMAND? Notes#1

What is demand? Definition: demand is the willingness to buy a good or service and the ability to pay for it Must have both elements for demand to exist

Law of Demand Definition: states that when prices go down, quantity demanded increases and that when prices go up, quantity demanded decreases

Demand Schedule Definition: a table (or listing) of how much of an item an individual is willing to purchase at each price

Individual Demand Schedule Price (per DVD) Quantity Demanded 30 25 1 20 2 15 3 10 4 5 7

Individual Demand Schedule (continued) What can we learn from an individual demand schedule? How much of an item one person is willing and able to by at a specific price On the previous slide I am not willing nor able to buy any DVDs at $30 But, I am willing and able to buy 7 DVDs if they are $5 each

Market Demand Schedule Definition: a listing of how much of a good or service all consumers are willing to purchase at each price This shows the demand of all people in a market who are willing and able to buy a good/service

Market Demand Schedule (continued) Purpose: Business owners need a market demand schedule in order to price a good to gain the maximum number of sales

Sample Market Demand Schedule Price (per DVD) Quantity Demanded 30 50 25 75 20 100 15 125 10 175 5 300

Demand Curve Definition: graphically shows the data from a demand schedule Market Demand Curve Definition: graphically shows the data from a market demand curve Individual Demand Curve Definition?

Draw an Individual Demand Curve Use the data below to construct an individual demand curve for DVDs Price (per DVD) Quantity Demanded 30 25 1 20 2 15 3 10 4 5 7

Individual Demand Curve Note: the vertical axis is always price and the horizontal axis is always quantity demanded (of a particular product)

Applying What You Have Learned

Vera Wang: Designer in Demand Read P. 104 and answer question D.

Questions 1. Why is it unlikely that most brides will have demand for an original Vera Wang gown?

2. Explain why a demand curve slopes downward.

3. Does quantity demanded always fall as price rises? WHY? 4. List 2-3 goods or services that you believe would remain in demand even if the price rose sharply.

Create a demand schedule 5. Pizza King makes the best pizza in town. Create a demand schedule (below) showing how many pizza per month you would buy at the following prices: $25, $20, $15, $10, and $5. Make sure to label the schedule accurately.

6. Graph your demand curve for pizza 6. Graph your demand curve for pizza. Make sure to label your individual demand curve accurately.