Section 1- What is Demand?  Demand- The desire to have some good or service and the ability to pay for it.  If you cannot afford something, technically, you have no demand for it.

Law of Demand  - states when the price of a good or service falls, consumer buy more of it.  - when the price rises, consumers buy less of a product.

 - Can you give me an example of a product in your life in which price may have affected by the law of demand?

Demand Schedules  - A table that shows how much of a good or service an individual consumer is willing and able to purchase at each price in the market

Pizza demand schedule Quantity DemandedPrice

Market Demand Schedule  Shows how much of a good or service all customers are willing and able to buy at each price in a market. Energy Drink Market Demand Schedule Price per Energy DrinkQuantity Demanded

Demand Curves  - A demand curve is a graph that shows how much of a good or service that an individual will buy at each price.  - It displays data from a demand schedule.

Pizza Demand Curve

Market Demand Curve  - Shows the data found in a market demand schedule.  - Shows the quantity that all consumers or the market as a whole are willing to buy at each price.

Energy Drink Market Demand Curve

 The demand curves used in yesterday’s examples rested on the assumption that all other economic factors would remain the same.

Law of Diminishing Marginal Utility  -states that the benefit of using each additional unit of a product over a given time will decline.  - Review: What is Utility?

Income Effect  A change in the amount of a product that a consumer will buy because the purchasing power of his income changes.

Substituion Effect  Pattern in which consumers react to the change in the price of a good or service by buying a substitute product.  - ex: buying magazines b/c. the price of books goes up

Change in Quantity Demanded  - The change in the amount of product people buy due to a change in price.  Seen as a movement along the demand curve.

Change in Demand  - Change in demand occurs when a change in the marketplace such as high unemployment prompts consumers to buy different amounts of a good or service at every price.  also called a shift in demand b/c. it actually shifts the demand curve

Factors that Cause A Change in Demand 1. Income -if income changes, for higher or lower, one’s ability to buy goods and services changes -2.Market Size - If the amt. of consumers increases or decreases, the market also changes. ex: tourists, population shifts 3. Consumer Tastes - when a product loses popularity, consumers demand less of it, and vice versa

 4. Consumer Expectations  If you think the price of something will change, that can determine when you buy it 5. Substitute Goods 6. Complementary Goods - are goods that are used together, so a rise in demand leads to a rise in demand for the other. - price for both changes in the same way ex: milk and cereal

Section 3- Elasticity of Demand

 - Elasticity of demand describes how responsive consumer are to price changes in the marketplace  Demand is elastic when a changed in price leads to a large change in the quantity demanded  Inelastic demand, or inelasticity, is the opposite

What Determines Elasticity?  1. Substitute goods or services  If there is no substitute for a good or service, its demand tends to be inelastic  2. Proportion of Income  Demand for products that cost a small porportion of one’s income tend to be inelastic 3. Necessities vs. Luxuries - demand for necessities is inelastic - people will pay what they need to

Total Revenue  Total Revenue = PxQ  P= Price  Q= Quantity