Supply & Demand #1: What is Demand?

Journal What is the relationship between Rational Self-Interest Theory and Demand? –Copy AND answer –Use your resources to help you make a connection

Demand #1 Objectives 1.To describe and illustrate the concept of demand. 2.To explain how demand and utility are related.

Let’s Make Some Predictions About Demand… A hair dye is successfully advertised in the media –Prediction: Its demand curve will shift RIGHT LEFT UP DOWN People get tired of Beanie Babies –Prediction: The demand curve for Beanie Babies will shift RIGHT LEFT UP DOWN

Demand The desire, ability, and willingness to buy a product Quantity demanded: amount demanded

Demand Schedule PRICE QUANTITY DEMANDED $300 $250 $201 $153 $105 $58 A listing that shows the various quantities demanded of a particular product at all prices that might occur in the market at a given time

Demand Curve A graph showing the quantity demanded at each and every price that might occur in the market

Demand Curve in Action PRICEQUANTI TY DEMAN DED $300 $250 $201 $153 $105 $58

Law of Demand Quantity demanded varies inversely (opposite) w/ price: –Price goes up, demand goes down –Price goes down, demand goes up If pineapples go on a sale, what happens to the quantity demanded?

The Market and Demand Market Demand Curve – demand curve that shows the quantities demanded by everyone who is interested in purchasing the product

Demand & Marginal Utility Marginal utility – the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product Diminishing marginal utility – the extra satisfaction we get from using additional quantities of the product begins to diminish –Why don’t you watch 3 movies on 1 night? –Why don’t you take 2 copies of the same newspaper?

Essential Questions 1.Describe the relationship between the demand schedule and demand curve. 2.Describe how the slope of the demand curve can be explained by the principle of diminishing marginal utility.