1. Demand: Unit Outline Outline 1.Demand. 2.Quantity Demanded 3.Demand Curve 4.Price Effect 5.Substitute Goods 6.Complimentary Goods

2. © 2009 Pearson Addison- Wesley. All rights reserved. Demand: What is Demand? Quantity demanded - the amount of a good that consumers are willing and able to buy at a given price – holding constant the other factors that influence purchases Law of Demand - An inverse relationship between the quantity demanded and the price of a product – You buy more when something is cheap, and less when something is expensive

3. Demand: How to Measure  Demand curve – Shows the quantity demanded at each possible price  a model used to show how much of a good is demanded depending on price  Price Effect – The inclination of people to buy less of something at higher prices than they would buy at a lower price

4. Figure 2.1 A Demand Curve Law of Demand consumers demand more of a good the lower its price, holding constant all other factors that influence consumption Price Quantity 0

5. Quantity Demanded vs Deman © 2009 Pearson Addison- Wesley. All rights reserved. 2-5  Quantity demanded – Will result in movement along an existing demand curve  A result of a change in price  Demand – Will result in a shift of the entire demand curve  A result of “Demand Shifters”

6. Demand for Cellphones © 2009 Pearson Addison- Wesley. All rights reserved. 2-6 Price Quantity Demanded $ 50.0015 $100.00 13 $150.00 9 $200.00 8

7. Change in Quantity Demanded 2-7 Price Quantity 0 1 2 1 2

8. 2-8 Figure 2.2 A Shift of the Demand Curve p 1176 D1D1 D2D2 2 Q, 0 1

9. Demand Shifters  Change in income  Price/availability of substitute goods  Price/availability of complimentary goods  Change in the weather or season  Change in the number of buyers  Change in styles, tastes, habits  Change in expectations about price

10. © 2009 Pearson Addison- Wesley. All rights reserved. 2-10 Solved Problem 2.1 How much would the price have to fall for consumers to be willing to buy 1 million more kg of pork per year?

11. © 2009 Pearson Addison- Wesley. All rights reserved. 2-11 Application: Aggregating the Demand for Broadband Service