1. The insatiable desire to have everything
Demand

2. Class Tomorrow 35 multiple choice questions from Chapters 1 and 2
Class Schedule:
40 minutes to complete questions
45 minutes to go over answers

3. Economic Principle?

4. Demand
What is demand?
Human nature would suggest that there we have unlimited wants (or demands). In our society, what regulates your demand or wants?
Possible Responses:
Availability of product;
Law of diminishing marginal utility;
Prices.

5. Demand
The quantity that consumers will buy of a certain product at various prices. It is typically expressed in terms of a schedule or a curve.
Specified time period
Statement of intentions

6. Demand for Creemes
On the piece of paper in front of you, please list how many creemes (vanilla, chocolate or maple) you would buy each week from the cafeteria at the following prices:
$0.25
$0.50
$1.00
$1.50
$2.00
$3.00

7. Demand Schedule Price Demand Per Week $0.25 10 $0.50 8 $1.00 5 $1.50 3
$2.00 2
$3.00 1

8. Law of Demand
As price falls, the quantity demanded rises; as price rises, the quantity demanded falls.
Inverse relationship between price and quantity demanded.
Demand Curve is therefore always downward sloping

9. Drawing a Demand Curve Price is on the vertical axis
Quantity is on the horizontal axis
Label all parts of the graph

10. Demand Curve
Price($)
Demand (D)
Quantity

11. Demand For Creemes
Groups: At each of your tables, determine the total demand for creemes.
For the second question, I would like each of you individually to draw the demand curve for the demand that you determined for your table.
Next, individually, answer the third question.
We will now develop a demand curve for the class and draw the curve for this schedule.

12. Determinants of Demand
These are other factors (aside from price) that influence the amount of any product purchased. Changes in these will change the demand data/schedule. Changes in any of these factors will SHIFT the demand curve, either to the right or the left, not up or down.
Tastes or Preferences
Number of Consumers
Consumer Income
Prices of Related Goods: Substitute and Complimentary Goods
Expected Prices

13. Shift In Demand Curve
A change in one of these items will shift the demand curve to the right (increase) or left (decrease).
Price ($) D2 D1
Quantity

14. Change In Quantity Demanded
A change in the quantity demanded will come about due to a change in PRICE. This will result in a movement along the demand curve. An increase in price from A to B will change the quantity demanded, and thus result in a movement along the demand curve from D to C.
Price ($) B A D1
C D Quantity

15. Change in Price
A change in the price of a good results in a change in the Quantity Demanded. This is not a shift in the curve, but merely a movement along the curve.
A change in the determinants of demand will result in a shift in the demand curve for the product.

16. Demand Exercise
In your group, please answer questions 4 and 5 on the exercise sheet you have been given.
On the top of the last page of the handout, please answer the following questions found in the next few slides.

17. Demand Exit Quiz
1. All other things being held constant, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds (mopeds are a very low power motorcycle)?
A. A decrease in consumer income.
B. A decrease in the price of mopeds.
C. An increase in the price of bicycles.
D. An increase in people’s tastes for mopeds.

18. Answer B
A decrease in the price of mopeds will cause a change in the quantity demanded, not a shift in the demand curve. All of the other three answers will cause a shift in the demand curve.

19. Exit Quiz Continued
. 2. “Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely, and using terms that are defined by economists, choose the statement that best describes the quotation:
A. The quotation is correct-an increase in price always causes a decrease in demand.
B. The quotation is incorrect-an increase in price always causes an increase in demand.
C. The quotation is incorrect-an increase in price causes a decrease in the quantity demanded, not a decrease in demand.
D. The quotation is incorrect-an increase in price causes an increase in the quantity demanded, not a decrease in demand.

20. Answer C
The quote is incorrect as an increase in the price will cause a decrease in the quantity demanded, not a decrease in demand.

21. E.Q. Cont’d
3. “As the price of domestic autos has inched upward, customers have found foreign autos to be a better bargain. Consequently, domestic auto sales have been slipping and foreign auto sales have been moving briskly.” Using only information in the quotation and assuming everything else constant, which of the following best describes this statement:

22. Questions 3 Choices
A. A shift in the demand curves for both domestic and foreign autos.
B. A movement along the demand curve for both domestic and foreign autos.
C. A movement along the demand curve for domestic autos and a shift in the demand curve for foreign autos.
D. A shift in the demand curve for domestic autos and a movement along the demand curve for foreign autos.

23. Answer C
The statement says that domestic auto prices have increased which would cause a movement along the demand curve-higher price, lower quantity demanded. A better bargain for foreign autos, does not mean that their price has changed. People now have a preference for foreign autos . Thus the demand curve will shift to the right.

24. Last Question
4. A fellow student is heard stating the following: “ Economic markets are like a perpetual see-saw. If demand rises, the price rises; if price rises, then demand will fall; if demand falls, price will fall; if price falls, demand will rise…. And so on forever.
Dispel your friends confusion. Where is the error in this statement?

25. Answer
The student is confusing a change in “demand” (shift in the demand curve) with a change in the “quantity demanded” (movement along the demand curve). The second statement (“If price rises, then demand will fall”) is wrong as the quantity demanded will fall. This is not a change in demand, and therefore the remaining statement does not follow.

26. Source of Demand Questions and Answers
Advanced Placement Economics: Teachers Resource Manual; John S. Morton; National Council on Economic Education