Promptbook  What is economics?  What are the four types of factors of production (resources)? Write down 2-3 examples of each.  What are goods and services? Write down 2-3 examples of each.  What are the three central questions fo economics?

Markets and Demand

What is a market?

Market  Market – any situation where buyers and sellers of goods, services or resources are linked together to carry out an exchange

Market  A market may be in a specific place (like a vegetable market), or it may involve many different places (such as the oil market).  Buyers and sellers may meet (like in a shop), or they may never meet face-to- face.  They can be local, national or international

Market Buyer  Buyers demand goods/services/r esources Seller  Sellers supply goods/services/r esources

Demand  Demand shows the quantities of a good or service consumers are willing and able to buy at different possible prices

Individual Demand Price of chocolate bars ($)Quantity of chocolate bars demanded (per week)

Individual Demand Price of t-shirts ($)Quantity of t-shirts demanded (per year)

Individual Demand to Market Demand  Market demand shows the total quantities of goods consumers in the market are willing and able to buy at different prices.  Market demand is the sum of all individual demands for a good.

Individual Demand to Market Demand

Law of Demand  As the price of a good increases, the quantity demanded falls  As the price of the good falls, the quantity demanded increases Price Quantity Demanded Price Quantity Demanded Ceteris Paribus

Law of Demand  Why is this true? 1.Income effect 2.Substitution effect Price Quantity Demanded Price Quantity Demanded

Change in Quantity Demanded

Non-price determinants of demand  Non-price determinants of demand are things other than price that can influence demand.

Non-price determinants of demand

 Changes in the determinants of demand cause shifts in the demand curve: the entire curve moves left or right.

Non-price determinants of demand  A rightward shift in the demand curve indicates that more is demanded at any given price. This is called an increase in demand.

Non-price determinants of demand  A leftward shift in the demand curve indicates that less is demanded at any given price. This is called an decrease in demand.

Non-price determinants of demand  Non-price determinants of demand are things other than price that can influence demand. 1. P opulation 2. I ncome 3. R elated Goods 4. A dvertising 5. T astes 6. E xpectations 7. S easons

Population  An increase in population leads to a rightwards shift (increase) in demand for all goods.  A decrease in population leads to a leftward shift (decrease) in demand for all goods. Population Demand Population Demand

Income  An increase in income leads to a rightwards shift (increase) in demand for normal goods. Most goods are normal goods.  An increase in income leads to a leftward shift (decrease) in demand for inferior goods. Income Demand Income Demand

Prices of Related Goods Substitutes  Example: Coke and Pepsi  If the price of a substitute good (X) decreases, demand for a good (Y) decreases.  If the price of a substitute good (X) increases, demand for a good (Y) increases. Price of Substitute Demand Price of Substitute Demand

Prices of Related Goods Complements  Example: DVDs and DVD players  If the price of a complement good (X) decreases, demand for a good (Y) increases.  If the price of a complement good (X) increases, demand for a good (Y) decreases. Price of complement Demand Price of complement Demand

Advertising/Tastes  If people begin to like a product more, there is a rightwards shift (increase) in demand  If people begin to dislike a product, there is a leftwards shift (decrease) in demand Like Demand Like Demand

Expectations  If people expect the price of a product to increase in the future, they will buy more in the present, and there is a rightwards shift (increase) in demand  If people expect the price of a product to decrease in the future, they will buy less in the present, and there is a leftwards shift (decrease) in demand Future price Demand Future price Demand

Seasons  Demand for some products may be dependent on the season. For example, demand for coats shifts rightwards (increases) in the winter.

Lesson Objectives  Distinguish between movements along the demand curve and shifts of the demand curve.  Draw diagrams to show the difference between movements along the demand curve and shifts of the demand curve.  Explain how factors including changes in income (in the cases of normal and inferior goods), preferences, prices of related goods (in the cases of substitutes and complements) and demographic changes may change demand.

Student Workpoint 2.1  Pg. 24

Homework HL  Read pgs SL (No Class Monday, For Wednesday)  Read pgs

Lesson Objectives  Outline the meaning of the term market.  Explain the negative causal relationship between price and quantity demanded.  Describe the relationship between an individual consumer’s demand and market demand.  Explain that a demand curve represents the relationship between the price and the quantity demanded of a product, ceteris paribus.  Draw a demand curve.