1. The Demand Curve
AP Econ 8/25

2. Warm Up
For each item, think about how many of each you would buy at the specific prices. Write this in your notebook.
Song downloads: $2, $1.00, .50, .25, .10
Candy bars: $2, $1.50, $1, .50, .20
Jeans: $100, $50, $30, $20, $10

3. Markets Markets bring together buyers and sellers
Buyers demand products/resources
Sellers supply products/resources
Focus on markets with large numbers of independently acting buyers and sellers of standardized products

4. Intro into Demand
Demand: A schedule or curve that shows the various amounts of a product (resources) that consumers (businesses) are willing AND able to purchase at each of a series of prices during a specific period of time

5. Law of Demand
The Law of Demand: Other things equal, as price falls, the quantity demanded rises, and as prices rises, the quantity demanded falls
Negative or inverse relationship between price and quantity demanded
***AKA: We are more willing to buy more units at a lower price
Why?
Income effect – lower prices increases purchasing power
Substitution effect – at a lower price, buyers have the incentive to substitute what is now a relatively less expensive product

6. Individual Demand Schedule
Price Quantity Demanded
$30
$25
$20 1
$15 3
$10 5 $5 8

7. Individual Demand Curve
Plot demand schedule onto graph
A. X-axis is ALWAYS quantity
B. Y-axis is ALWAYS price
C. Demand curve practice: plot one demand schedule from your warm- up onto a set of axes.

8. The Market Demand Schedule
Definition: shows quantities demanded by EVERYONE
Find 2 or 3 partners in your area and choose one warm up example to form a market demand schedule. Each partner must write in their notebook. Ex:

9. Market Demand Curve

10. Demand and marginal utility
Marginal utility: the extra satisfaction we get from using one more unit of a product
Diminishing marginal utility: that extra satisfaction diminishes as we use more units
1. Example: candy bars
Aren’t willing to pay as much for the 2nd, 3rd, 4th ones.
***Explains why demand curve is downward sloping

11. Factors Affecting Quantity Demanded
A change in demand is a shift of the demand curve to the right or left
A change in the quantity demanded is a movement along the demand curve
Demand schedule remains fixed
Movement along the demand curve
ex. Price drops from 20 to 15  change in quantity demand from 23 to 30

12. Change in Demand Causes a shift in entire demand curve.
People willing to buy different amounts at the same prices before.

13. Determinants of Demand
AKA Demand Shifters
Consumer income: What happens to demand when income is increased?
Consumer tastes/preferences: Example 1: trends, Example 2: VCRs
Changes in the prices of related goods Ex: Substitutes and Complements
Change in expectation: Example: future shortages/sales
Number of consumers: Increase in # of consumers  shift in market demand curve

14. Types of Goods
Normal Good – demand for product varies directly with changes in income ex. Jewlery, new cars, name brand clothing
Inferior Good – demand for product varies inversely with changes in income ex. Ramen noodles, used clothes, used cars
Substitute Good – similar goods. If the price of good A rises, the demand for substitute good B rises. Ex. Butter and margarine
Complements – goods that are used together. If the price of good A rises, the demand for complement good B falls ex. Peanut butter and jelly

15. Demand Shift Practice
Product: SUVs. Scenario: Because of world shortages, the price of oil has sharply increased.
Product: TVs (considered a normal good). Scenario: People are earning more money this year than last.
Product: Coffee in the US. Scenario: Immigration into the US continues to increase.
Product: LA Lakers season tickets. Scenario: The LA Clippers (the other basketball team in LA) have raised the price of their season tickets.