Chapter 21.1-21.2 DEMAND IN THE US ECONOMY. DEMAND Demand is the amount consumers are willing to buy at all prices. Consumers control the demand-side.

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Presentation transcript:

Chapter DEMAND IN THE US ECONOMY

DEMAND Demand is the amount consumers are willing to buy at all prices. Consumers control the demand-side of our economy. Must have want, willingness, & resources! The Law of Demand says as prices increase, the quantity demanded decreases. This principle is illustrated by an auction. The price increases, but the number of buyers decreases to one.

DEMAND What is the difference between a demand schedule & a demand curve? Which way does the demand curve always slope? Why? Do Demand graphing exercises. Set up graph using equal intervals on both axes. Label P, Q, D, 0. Discuss the law of diminishing marginal utility with example.

FACTORS THAT CHANGE DEMAND Changes in the population of consumers Ship deployment/return Changes in tastes or trends Beanie babies Changes in income Minimum wage Changes in expectations Gas prices Changes in substitutes Coke vs. Pepsi Changes in complements Peanut butter & jelly

ELASTICITY OF DEMAND Elastic demand means there is a great difference between quantity demanded and changes in price. Lots of competition, substitutes causes elasticity (Pepsi, ex) Inelastic demand means quantity demanded varies little with changes in prices. Usually lack of competition or substitutes cases inelasticity. (Gasoline, ex)