1. Demand
Lesson 3
Section 5

2. Supply and Demand: A Model of a Competitive Market
Sellers and buyers constitute a “market”.
A Competitive Market is where there are many buyers and sellers.
The Supply and Demand model works well for competitive markets
Demand Curve
Supply Curve
Factors that cause the supply and demand curves to shift
Market equilibrium, equilibrium price, equilibrium quantity

3. Demand The Law of Demand
The desire to own something, and the ability to pay for it.
The Law of Demand
As prices go up quantity demanded goes down.
As prices go down quantity demanded goes up.

4. Demand Curve
The demand curve is a downward sloping line showing the inverse relationship between quantity and price

5. Demand Schedule

6. Market Demand
Demand curves can show the demand for an individual, or for a “market” of any defined size (classroom, CPHS, Pleasant Hill, etc.)

7. Shifts in demand
Shifts in demand come from changes other than the change in price
Changing technology
Seasonal changes
Good or bad news
Income and inferior goods
Consumer expectations
Population
Consumer taste and Advertising
Substitute and Complimentary goods

8. Substitution Effect
The substitution effect takes place when there is a similar product which can be substituted if the price of the original product becomes too high.
Butter vs. Margarine
Coke vs. Pepsi (or any other soda, drink)

9. Complimentary Goods
Some goods go naturally together. When you buy product A, product B goes with it, so you buy them together.
Cereal and milk
Peanut butter and Jelly and Bread
Skis and Ski poles and Ski Boots
Flashlight and batteries

10. Income Effect
As income rises, demand for “inferior” products goes down, while demand for superior products rise.
Wal-Mart vs. Bloomingdales
Generic products versus Name brands