 Goal: Demand Summary Day  Warm-up: Demand Worksheet

 Collect Demand curves/schedules  Quiz on demand on Friday  Wednesday – mini project

 Definition – The ability and willingness of people to buy specific quantities of a good or service at alternative prices in a given time period  The price paid is a willing choice based upon perceived value to the buyer  The objective of the buyer is to get as much value as he can for the price paid  The Law of Demand states that generally people will buy more of a good or service at lower prices and less at higher prices  Demand Curves generally slope downward to the right

 An inverse relationship exists between the price of a good and the quantity demanded in a given time period.  Reasons:  substitution effect  income effect

Change in quantity demanded Change in demand

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Table 1 is the Demand Schedule Figure 1 is the Graph of the Demand Schedule Figure 1 The line is the Demand Curve

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Table 1 Price QD $500 1, , , , , , , , , Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Figure 1 Price and Quantity Demanded are inversely related Quantity Demanded is a point on the Demand Curve

 Tastes and Preferences – The consumer’s desire for various goods and services  Income – The higher it is, the more we consume  Other Goods – Availability and Price  Expectations – for income; for price changes; for new products; etc  Number of Buyers – The more; bigger demand; greater demand

 Effect of fads:

 An increase in the number of buyers results in an increase in demand.

 A higher expected future price will increase current demand.  A lower expected future price will decrease current demand.  A higher expected future income will increase the demand for all normal goods.  A lower expected future income will reduce the demand for all normal goods.

 Complement Products are two or more products that are generally consumed, or used, together Hot dogs and Mustard Peanut Butter and Jelly  If price of the primary good, say hot dogs, increases, the quantity demanded (Qd) of that good will decrease, and  A decrease in the Qd for hot dogs will reduce the demand for mustard, and ultimately the price of mustard will fall  So, the prices of complementary goods are said to be inversely related

 Substitute Products are two or more products where one product may be substituted for another Pepsi Cola or Coca Cola Canned tuna fish or canned chicken  If the price of Pepsi increases, the quantity demanded (Qd) will decline, and  The decrease in (Qd) for Pepsi will lead to an increase in the demand for Coca Cola which will lead to an increase in the price of Coca Cola,  So the prices of substitute products are said to be directly related

 Price of coffee rises:

INELASTIC – CHANGE IN PRICE = NO CHANGE IN DEMAND ELASTIC – CHANGE IN PRICE =MAJOR ADJUSTMENT IN DEMAND  Is it a necessity?  Are there a low numbers of substitutes?  Is it relatively cheap?  3 Yes?  Example: pacemakers  Is it a necessity?  Are there a few number of substitutes?  Is it expensive?  3 Nos?  Examples: pizza