1. Demand
Chapter 4

2. Bell ringer 10/22
In your own words, explain what you believe is meant by the term “demand”. Describe 2 different reasons that demand for a product would increase. Describe 2 reasons why demand for a product would decrease.

3. Demand
How much of a product consumers are both willing and able to buy at each possible price during a given period.
clear-snow/

4. Law of Demand As quantity demanded increases, price decreases.
As quantity demanded decreases, price increases.
Demand
Demand
Price
Price

5. Law of Demand

6. What Explains the Law of Demand?
Substitution Effect
The change in the relative price- the price of one good relative to the prices of other goods

7. Bell ringer 10/23
Brainstorm a list of products that you consume in a typical week. Then, decide at what price your demand for that product would decrease. In other words, at what price would you no longer be willing to purchase that good or service.

8. Income Effect
Change in price causing change in purchasing power
Money income-# of dollars you receive per period
Real income-income measured in terms of how many goods and services it can buy

9. Changes in the Prices of Related Goods
Substitutes
Products that can be used in place of each other
Complements
Certain goods often used in combination

10. Shifts of the Demand Curve
Determinants of Demand
Consumer income
Prices of related goods
Number & composition of consumers
Consumer expectations
Consumer tastes
Demand Increase Shifts to the Right
Demand Decrease Shifts to the Left

11. Bell ringer 10/24 Graph the following Demand Schedule
Bell ringer 10/24 Graph the following Demand Schedule. When completed, write down a reason why quantity demanded could have increased.
Price Per Taco
Old Quantity Demanded
New Quantity Demanded
$2.00 25 75
$1.75 50
100
$1.50
125
$1.25
150
$1.00
175
$0.75
200

12. Increase in Demand

13. Demand Curve
A curve or line showing the quantities of a particular good demanded at various prices during a given time period

14. Changes in consumer Expectations
Expectations about factors that influence demand
Future income
Future price of the good

15. Changes in the Size or Composition of the Population
If the population grows, the # of consumers in the market increases

16. Determining shifts in Demand assignment
After you have shown where each curve would shift on the examples you were given, Create your own scenarios for different products showing a situation (outside of price) where the demand for that product would either increase or decrease. Create 6 scenarios.

17. Demand Schedule Price Quantity Demanded $70 40 $60 50 $50 60 $40 70
$30 80

18. Bell ringer 10/27
List 5 products that a price change would not affect your demand. In other words, what are 5 products that you would still buy even if the price went up?

19. Consumer Income Normal Goods
A good that consumers demand more of when their incomes increase
Most goods are normal
Inferior Goods
A good that consumers demand less of when their income increases
Bologna sandwiches, used furniture, used clothing etc.

20. Elasticity of Demand
Describes how strongly consumers will react to a change in price.
Inelastic Demand
Describes demand that is not very sensitive to change in price
Elastic Demand
Describes demand that is very sensitive to a change in price

21. Calculating Elasticity
Step 1
Find Percentage Change for quantity demanded and price change
Original # - New # x 100
Original #
Step 2
Determine Elasticity
% change in quantity demanded
% change in price

22. Calculating Elasticity
Elastic Demand
Greater than 1
Inelastic Demand
Less than 1
Unitary Demand
= to 1
6:23

23. Practice Determine the Elasticity of Demand for the following problems
Demand Price
4 5
10 3
2. Demand Price
3. Demand Price  
4. Demand Price Demand Price

24. Bell ringer 10/28
Think of an event or change that would cause the demand for a product to either increase or decrease. After you have determined a reason for a change in demand, draw a demand curve to show the change. Be sure to label price and quantity demanded on the curve.

25. Elasticity and Total Revenue
Knowledge of elasticity is especially valuable to producers, b/c it indicates the effect a price change will have on how much consumers spend on a product
Total Revenue
Price multiplied by the quantity demanded at that price

26. P E D C A B Q

27. Determinants of Demand Elasticity
Availability of Substitutes
Share of Consumer’s Budget Spent on the good
Time
Short Run
Consumers have little time to adjust
Long Run
Consumers more fully adjust to price change
Demand is greater

28. Bell ringer 10/29
-How much you would be willing to pay to go see your favorite athletic team, singer, band, show etc.? Describe reasons that you would be willing to pay this amount.