1. Demand
Unit 6

2. Opener: 10/9/17
Copy the definition and draw a picture that comes to mind when you see this definition. Demand is the desire, willingness, and ability to buy a good or service. demand schedule is a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices. utility–the pleasure, usefulness, or satisfaction a product gives us.

3. An Introduction to Demand
In the United States, the forces of supply and demand work together to set prices.
Demand is the desire, willingness, and ability to buy a good or service.
For demand to exist, a consumer must want a good or service, be willing to buy it, and have the resources to buy it.
A demand schedule is a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices.

4. An Introduction to Demand (cont.)
A demand schedule can be shown as points on a graph.
The graph lists prices on the vertical axis and quantities on the horizontal axis.
Each point on the graph shows how many units of the product or service an individual will buy at a particular price.
The demand curve is the line that connects these points.

5. An Introduction to Demand (cont.)
The demand curve slopes downward.
This shows that people are normally willing to buy less of a product at a high price and more at a low price.
According to the law of demand, quantity demanded and price move in opposite directions.

6. Individual vs. Market Demand
Market demand is the total demand of all consumers for a product or service.
Market demand can also be shown as a demand schedule and demand curve.
To illustrate, you would want to open a bicycle repair shop in an area with many bicycle riders and few repair shops.
To measure demand in the area, you could check prices at other similar shops and poll consumers about their reactions to the prices.

7. Individual vs. Market Demand (cont.)
We buy products for their utility–the pleasure, usefulness, or satisfaction they give us.
The utility of a good or service is different for different people.
A particular product may have no utility for some people.

8. Individual vs. Market Demand (cont.)
Say you eat a slice of pizza.
Because you are most hungry when you eat the first slice, this slice gives you the most utility, or satisfaction.
As you grow less hungry, each additional slice you eat provides less marginal utility, or less additional satisfaction.
The principle of diminishing marginal utility says that our additional satisfaction tends to go down as we consume more and more units.

9. Individual vs. Market Demand (cont.)
To make a buying decision, we consider whether the satisfaction we expect to gain is worth the money we must give up.
If the extra benefits (marginal utility) are greater than the marginal cost (extra money given up), we make the purchase.
If not, we keep the money instead.

10. Individual vs. Market Demand (cont.)
Because marginal utility diminishes, we would be willing to pay less for the second item than for the first.
Likewise, we would be willing to pay even less for the third item.
This helps to explain the downward sloping demand curve.

11. Opener 10/10/17
Copy the definition and draw a picture that comes to mind when you see this definition. Market demand is the total demand of all consumers for a product or service. diminishing marginal utility principle that says that our additional satisfaction tends to go down as we consume more and more units. law of demand, quantity demanded and price move in opposite directions.

12. Changes in Demand
Market demand can change when more consumers enter the market; when incomes, tastes, and expectations change; and when prices of related goods change.

13. Changes in Demand (cont.)
A graph of a market demand curve can show these changes.
When demand goes down, people are willing to buy fewer items at all possible prices.
In this case, the curve shifts to the left.
When demand goes up, the curve shifts to the right. People are willing to buy more of the item at any given price.

14. Changes in Demand (cont.)
Demand is related to the number of consumers in the area.
When more people move into an area, they buy more goods and services from local businesses.
As a result, the demand curve shifts to the right.

15. Changes in Demand (cont.)
When many people move away, demand for goods and services in the area decreases.
The demand curve shifts to the left.

16. Changes in Demand (cont.)
The number of consumers in an area can change due to changes in birthrates, death rates, immigration, or migration.
Income changes also affect demand.
When the economy is healthy, people receive raises or move to better-paying jobs.
With more to spend, they are willing to buy more of a product at any particular price.
In hard times, people lose their jobs.
With less income, they buy less, and demand goes down.

17. Changes in Demand (cont.)
Consumers’ tastes change.
When a product is popular, the demand curve shifts to the right.
When its popularity fades, demand decreases, and the curve shifts to the left.
Expectations affect demand.
If people believe hard times are on the way, they will buy less.
If people expect shortages of something, demand increases.

18. Changes in Demand (cont.)
Competing products are called substitutes because consumers can use one in place of the other.
A change in the price of one good causes the demand for its substitute to move in the same direction.
For example, an increase in the price of margarine results in an increase in demand for butter, the substitute.

19. Changes in Demand (cont.)
Complements are products that are used together.
The demand for one moves in the opposite direction as the price of the other.
For example, when the price of DVD players decreases, the demand for complementary goods—DVDs—increases.

20. Elasticity of Demand
When price rises, we know that quantity demanded will go down, but we don’t know by how much.
Demand elasticity is the extent to which a change in price causes a change in the quantity demanded for a product.

21. Elasticity of Demand (cont.)
For some goods and services, demand is elastic.
Each change in price causes a relatively larger percentage change in quantity demanded.
That is, when the price of a product changes a little, the quantity demanded changes a lot.
Demand for a good or service tends to be elastic if it has an attractive substitute.
Demand also tends to be elastic when the purchase can be postponed.

22. Elasticity of Demand (cont.)
For other goods and services, demand is inelastic.
Price changes have little effect on the quantity demanded.
Demand for goods with few or no substitutes tends to be inelastic.

23. Review: Up or Down?
Working in groups, move your desks together. One person in your group should get out a sheet of paper and draw an arrow on it.
You will then be presented with a scenario and asked a question based on the factors effecting demand.
Your job is determine the correct answer by displaying arrow pointing in the correct direction.

24. Scenario One
The price of iPods goes up, what will happen to the demand of songs on iTunes?

25. Scenario Two
Another company like Netflix is introduced, what will happen to demand for Netflix?

26. Scenario Three
It is rumored that DVD prices will go up, what will happen to demand?

27. Scenario Four
We are expecting a snow storm, what will happen to demand of eggs?

28. Scenario Five
There has been a huge stock market crash and as a result, most companies have had to make pay (if not job) cuts. What will happen to demand in the entertainment industry (things like concert sales, theme parks, etc.)?

29. Scenario Six
The iPhone 7s was just released but only at a limited quantity. How is demand affected?

30. Scenario Seven
The price of margarine falls but not of butter. What will happen to the demand of margarine?

31. Scenario Eight
Ford just hired 5000 new local employees, what will this do to housing demand in Oldham County?

32. Scenario Nine
The price of digital cameras takes a huge plunge due to a manufacturer who made a mistake and made too many. What will happen to the demand for photo paper?

33. Opener 10/6/16 Copy down the factors that affect demand
Change in Population
Change in Income
Change in expectations
Change in Taste
Change in price of related goods (substitute or compliment)

34. Headline: “Gas prices increase by 200% in a year”
Product:  SUV’s
Which factor affecting demand is at play? _____________________________
Will demand increase or decrease ___________________________________
Draw a demand graph to demonstrate this

35. Headline: “Gas prices increase by 200% in a year”
Product:  SUV’s
Which factor affecting demand is at play?
_____Change in Price of related goods___
Will demand increase or decrease
______Decrease______________
Draw a demand graph to demonstrate this

36. Headline: “Price of fresh blueberries skyrockets ”
Product: Strawberries
Which factor affecting demand is at play? _____________________________
Will demand increase or decrease ___________________________________
Draw a demand graph to demonstrate this