© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4  12.1 Students understand common terms & concepts and economics reasoning. Standard Address 1  Explain the law of demand  Interpret a demand schedule and demand curve Objectives

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CONTEMPORARY ECONOMICS: LESSON 4.13 CHAPTER 4 Demand The Demand Curve Elasticity of Demand Changes in Demand

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.14 CHAPTER 4 Demand  Why are newspapers sold in vending machines that allow you to take more than one copy?  How much do you eat when you can eat all you want?  What cures spring fever?  What economic principle is behind the saying, “Been there, done that”?  Why do higher cigarette taxes cut smoking by teenagers more than by other age groups? Consider

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.15 LESSON 4.1 The Demand Curve  demand  law of demand  marginal utility  law of diminishing marginal utility  demand curve  quantity demanded  individual demand  market demand Key Terms

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.16 Demand  Demand indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.17 Law of Demand  The relation between price and the quantity demanded is an economic law.  The law of demand says that quantity demanded varies inversely with price, other things constant.  Thus, the higher the price, the smaller the quantity demanded.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.18 Law of Demand Today's topics  Demand, wants, and needs  Substitution effect  Income effect  Diminishing marginal utility

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.19 Law of Demand  Demand, wants, and needs  Consumer demand and consumer wants are not the same thing.

© SOUTH-WESTERN I might be willing to buy certain things…

© SOUTH-WESTERN But, am I able to buy them?

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Law of Demand  Substitution effect  Remember that the change in the relative price – the price of one good relative to the prices of other goods – causes the substitution effect.

© SOUTH-WESTERN Cereal CONTEMPORARY ECONOMICS: LESSON 4.113

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Law of Demand  Income effect  Real income – that is, your income measured in terms of how many goods and services it can buy.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Law of Demand  Diminishing marginal utility  The satisfaction you derive from an additional unit of a product is called your marginal utility.

© SOUTH-WESTERN The satisfaction you get from a second pizza is your marginal utility of that pizza

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Law of Demand  Diminishing marginal utility (Continue)  The Law of Diminishing marginal utility – the more of a good a person consumes per period, the smaller the increases in total utility from consuming one more unit, other things constant.  The law of diminishing marginal utility helps explain why people buy more when the price decreases.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Millions of pizzas per week $ Price per pizza Demand Curve for Pizza a b c d e D. The schedule lists possible prices, along the quantity demanded at each price.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Millions of pizzas per week $ Price per pizza Demand Curve for Pizza a b c d e D. The demand curves slopes downward, reflecting the Law of Demand – that is, price and quantity demanded are inversely, or negatively, related, other things constant.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Demand Schedule Price Quantity Demanded per Pizza per Week (millions) a$158 b1214 c920 d626 e332

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Explain the law of demand in your own words. ?? Checkpoint Pg. 105

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Demand Schedule and Demand Curve  When you describe demand, you must specify the units being measured and the period being considered.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Demand Schedule and Demand Curve  Demand versus quantity demanded  An individual point on the demand curve shows the quantity demanded.  Demand, is not a specific quantity, but the entire relation between price and quantity demanded.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON $ (c) Chris $ (b) Brianna $ Price 123 Pizzas (per week) (a) Hector Individual Demand for Pizzas d H d B d C

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON Demand Schedule and Demand Curve  Individual demand and market demand  The market demand curve shows the total quantity demanded per period by all consumers at various prices.  The market demand is simply the sum of the individual curves for all consumers in the market.

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON $ Price 123 Pizzas (per week) (d) Market demand for pizzas 6 Market Demand for Pizzas d H d B d C D ++=