Why are tickets to the Super Bowl more expensive than tickets to a Chavez game?

VOCABULARY: Demand: The desire to own something and the ability to pay for it. Law of Demand: As the price of a good increases, quantity demanded decreases (and vice versa) (DO NOT SAY DEMAND DECREASES) In other words: when price goes up, we buy less…when price goes down, we buy more

 1. The Substitution Effect. occurs when consumers react to an increase in a good’s price by consuming less of that good… and more of other goods that satisfy the same basic need. OR

Substitutes: Goods that are used in place of one another. When the price of one goes up, the demand for the other goes up (and Vice Versa)

Compliments: Goods that are bought and used together. When the price of one goes up, the demand for the other goes down.

 The Law of Demand says that as price goes up, quantity demanded ____ _____.

IF I’m planning a barbecue and the price of hot dogs doubles, my decision to buy hamburgers instead is an illustration of the ________ effect.

 Individual Demand Schedule: a table that lists the quantity of a good that a person will purchase at each price in the market.  Market Demand Schedule: a table that lists the quantity of a good all consumers in a market will buy at each different price.

It is used by CEO’s and company executives to help them to determine how they should price their product.

1. If the price of tortilla chips increases, what will happen to the demand for salsa? 2. If the price of Coke increases, what will happen to the demand for Pepsi? 3. If two goods are substitutes, what will happen to the demand for Product A if the price of Product B decreases? 4. If two goods are complements, what will happen to the demand for Product A if the price of Product B decreases? 5. What is the Law of Demand?

In your notebook, write down the Individual and Market Demand Schedules on the board to your right.

What is a demand curve? It’s just a graphical representation of a demand schedule!

 Horizontal axis shows quantity  Vertical axis shows price  Let’s talk about horizontal, vertical, and quantity. -COPY DEMAND CURVE ON BOARD

 Vocab:  Change in Quantity Demanded: a movement along the demand curve caused by a change in ONLY price.

1. What is the change in quantity demanded if price changes from $2.50 to $2.00? 2. What is the change in quantity demanded if price changes from $2.00 to $1.00? 3. What is the change in quantity demanded if price changes from $0.50 to $2.00?

 Vocab:  Change in Demand: A shift in the demand curve due to factors other than price. Basically it shows that demand has changed at all different price levels.

 Factors that cause a Change in Demand (Shift of the Demand Curve): 1. Income (if we make more $, we will demand more of a good at any price. The opposite is also true!). 2. Consumer expectations (If we expect prices to rise in the future, we’ll be more likely to spend more $ now. If we expect a sale, we will be less likely to spend more now).

3. Consumer tastes and advertising (Think about it…why do companies use celebrities to promote their products?). 4. Population (If population goes up…so does demand. Think baby boomer gen.). 5. Prices of related goods (substitutes and compliments). (If the price of tortilla chips increases, what will happen to the demand for salsa?).

Increase in Demand is a right shift:

Decrease in Demand is a Left Shift.