1. Activator - Demand
Three people enter a Mazda dealership all interested in buying a brand new car. All three
initially stop to look at the Mazda RX8.
The first person tells the salesperson that they “really like the RX8” but they “don’t have any money today”, and are “saving their money for a purchase within the next 6 months”.
The second person tells the dealer that they “have the money to buy”, they “are going to ultimately buy RX8”, but they are shopping various dealerships and are “not willing to buy today”.
The third person tells the dealer that they “love the RX8!”, they “have the money” and they “want to buy it today.”
List each customer (1-3). Next to each customer, write each of the following that apply to their situation:
Desire to buy
Willingness to buy
Ability to buy
Customer
Desire
Willingness
Ability 1. 2. 3.

2. Demand Understanding Demand
Demand – desire, ability, and willingness to buy a good/service
The amount of a product that a consumer (individual) or group of
consumers (market) will purchase at a given price
Microeconomics – The study of the economic behavior and decision making of small units, such as individuals, families, and firms (businesses)

3. Application Chart – Demand
 Indicate 3 items that you want on one side, whether
you can afford them or not in the next, and whether
you are willing to buy them in the last.
Desired Items
Willingness
Ability/Afford
Demand 1. 2. 3.

5. Hudsucker Proxy video
What elements went into the decision of the owner to change the price of the hula hoop?
2) What factors could impact your decision to demand (or not demand) a good/service?

6. The Law of Demand
Law of Demand –prices are lower, consumers will buy more; prices are higher, consumers will buy less.
Inverse relationship between price and the QD of a product.
Prices influence the amount of something that we are willing to purchase
Price
Demand
Prices of Products Decreases
Quantity Demanded Increases
Price
Demand
Prices of Product Increases
Quantity Demanded Decreases

7. Change in Quantity Demanded
$3.50
$1.00

8. Change in Quantity Demanded
$3.50
$1.00

9. The Income Effect
Income Effect – the change in consumption resulting from a change in price, “more bang for your buck”
Consumers feel richer when prices drop, poorer when prices rise. Both
affect the Quantity Demanded of a product.
$44.50
x 0

10. The Income Effect
$44.50
$19.50

11. Substitution Effect $3.99 $4.99 $3.99
 Substitution Effect – when consumers react to an increase in
a good’s price by consuming less of one good and more of
other goods
$3.99
$4.99
$3.99

12. The Demand Schedule Price of Ice Cream Quantity Demanded $3.00 2.50 2
Demand Schedule - a table that lists the quantity of a good that an individual will purchase at each price in a market
•Market Demand Schedule - lists the quantity of a good that all consumers will purchase at each price in the market
Price of Ice Cream
Quantity Demanded
$3.00
2.50 2
2.00 4
1.50 6
1.00 8
.50 10
.10 12
Price of Ice Cream
Quantity Demanded
$3.00
2.50 30
2.00 50
1.50
100
1.00
200
.50
300
.10
400

13. Application - The Demand Curve
Plot the points of the following schedule on the graph
Demand Curve - graphically represents the demand schedule
Demand Curve is downward sloping because of the law of demand
Price per Ice Cream Cone
$3.00
2.50
Price
Quantity
$3.00
2.50 2
2.00 4
1.50 6
1.00 8
.50 10
.25 12
2.00
1.50
1.00
0.50
Quantity Demanded of Ice-Cream Cones per week

14. Demand Curve Assignment
Explain why the curve is downward sloping
Give an example of a time that you experienced the income effect
Give an example of a time that you experienced the substitution effect
A “__________” is a table that lists the quantity of a good/service a person will buy at each price that may be offered in the market
A “_________________” is a table that lists the quantities of a good/service all consumers will buy at each price that may be offered in the market.
A “______________________” is a graphical representation of a demand schedule
The “____________________” is the effect is the change in consumption resulting from a change in price, which affects a person’s purchasing power
The “ __________________” is effect is the change in consumption resulting from a change in price of a related product, when a person can replace one item with another

15. Demand Curve Assignment
Answers
Inverse relationship
Individual Answer
Demand Schedule
Market Demand Schedule
Demand Curve
Income
Substitution

16. Demand Curve
Price (P) a
$44.50 b
$19.90 6
Quantity
Demanded (QD)

17. Movement Along the Demand Curve
• Movement – is caused by a change in the price of a product
• Changes the quantity demanded of a product
P P b a
$100 $100 a b D
$10
$10 D 10
100 QD 10
100 QD

18. What Could Change in a Life That Could Affect the
Demand For Express Clothing?
Income
Having a Child
Buying a
different Brand

19. Where is the Demand? P QD
New Express Demand P QD

20. Changes in Demand Price 2003 $40.00 8 35.00 4 10 30.00 6 14 2 25.00 16
Price per Ticket
$40.00
35.00
30.00
25.00
20.00
15.00
Price
2003
Playoffs
Next Season
$40.00 8
35.00 4 10
30.00 6 14 2
25.00 16
20.00 18
15.00 12 22
10.00 24
10.00 D2 D D1
Quantity Demanded of Tickets

21. Shifts of the Demand Curve
Price
Changes in Demand are reflected as a shift in the curve
Shifts to the right indicate an increase in demand
Shifts to the left indicate a decrease in demand
Increase in demand
Decrease
in demand D1 D D2
Quantity Demanded

22. 1. Consumer Income
Consumer Income – The amount of money a consumer has can affect their willingness to purchase certain items.
Examples:
Normal good – Express For Men (Name Brand) Inferior good – Wal-Mart Brand (Generic Brand)   

23. Normal Good
Inferior Good

24. Consumer Income P D D1 QD P D1 D QD

25. Consumer Income P D1 D QD P D1 D QD

26. 2. Price of Related Goods
Price of related goods – demand for goods can be affected by the price for related goods
Examples:
Complements - Iphone and Case Substitutes - Gatorade and Powerade   

27. Complementary ProductsQD P D D1 QD

28. Substitute Products P D QD P D QD

29. 3. Consumer Tastes
Consumer Tastes and Advertising – changes in popularity changes the “dollar vote” of the consumer
Examples:
Popularity decreases - 80’s band Poison
Popularity increases - Drake   

30. Consumer Tastes P
D1 D QD P D D1 QD

31. 4. Consumer Expectations
Consumer Expectations – the way people anticipate changes in products, technology or the economy
Example:
Iphone 5 to the Iphone 10 Changes in body styles of cars   

32. Consumer Expectations
D1 D QD P D D1 QD

33. 5. Number of Buyers (Population)
Population – an increase/decrease in the number of consumers Increase in population - Georgia Florida weekend, Super Bowl, Olympics Decrease in population - Detroit, loss of 1 million people  

34. Number of Buyers (Population)D D1 QD P D D1 QD

35. The Determinants of Demand
Consumer Income
Tastes
Expectations
Price of Related Goods
Population

36. Difference Between Movement (Change in Quantity Demanded) and a Shift (Change in Demand)
QD (Movement) - A change in the amount a consumer will purchase as a result of a change in price
Ceteris paribus – all other things constant, all things remaining the same
Reflected as movement along the curve
D (Shift) – A change in the amount a person will buy as a result of an outside factor (change in ceteris paribus - popularity of product, consumer income, etc.), not having to do with price
Reflected as a shift
P P
a a
$100 $100 b D b D
$10
$10 10
100 QD 10
100 QD

37. Analysis of the Beef Market
Headline
Demand Shift?
(Y/N)
Does the curve shift
Left/Right? Or did it cause movement along the curve?
Increase/Decrease
in Demand, or Change in Quantity Demanded?
New
Curve (A or C), or N/A.
Determinant(s) of
Demand (Income, Population, Price of Related Product, Expectations, Tastes) or
Not Applicable.
1. Millions of Immigrants
Swell U.S. Population
Yes
Right
Increase C
Population
2. The Price of a lb. of
Beef Doubles No
Movement QD
N/A
N/A (price)
3. Consumer Income for
U.S. consumers falls for
3rd straight month
Left
Decrease A
Income
4. Surgeon General Warns
That Eating Beef is Hazardous to Your Health
Tastes/Expectations

38. Yes Right Increase C Expectations Left Decrease A No Movement QD N/A
Headline
Demand Shift?
(Y/N)
Does the curve shift
Left/Right? Or did it
cause movement along the curve?
Increase/Decrease
in Demand, or
Change in Quantity Demanded?
New
Curve (A
or C), or N/A.
Determinant(s) of
Demand (Income,
Population, Price of Related Product, Expectations, Tastes) or Not Applicable.
5. Price of Beef to Rise
Next Month
Yes
Right
Increase C
Expectations
6. Price of Beef to Fall
Left
Decrease A
7. The Price of lb. of Beef
falls by 50% No
Movement QD
N/A
N/A (price)
8. Free Buns With Every
lb. of Beef at Local
Publix
Related goods

39. Flow Chart – Determinants of Demand
What Causes a Shift?
Consumer Income
Consumer Expectations
Population
Consumer Tastes and Advertising
Price of Related Goods
Example of Increase Demand An individual gets a an increase in income. Increase in demand for name brand
products; decrease
for generic.
Example of Increase Demand If an individual expects price of
the bike to rise in the future, their demand will increase today.
Example of Increase Demand Return of soldiers from WW2 led to a baby boom, which increased demand for baby products.
Example of Increase Demand Bell-bottomed jeans
were at one time very popular.
Example of Increase Demand Snowboards will experience an
increase in demand if the price of skis goes up, making the two goods substitutes.
Example of Decrease Demand An individual’s
Example of Decrease Demand
If an individual expects the price of the bike to go down in the future then their demand will decrease today.
Example of Decrease Demand If a population decreases, then their will be a decrease in demand for housing,
automobiles, food, etc.
Example of Decrease Demand
Any product that goes out of style can be affected by consumer tastes and a decrease in demand.
Example of Decrease Demand
Ski boots are considered complements for skis. If Ski boots are too expensive, demand for skis will decrease.
income goes down. Decrease in
demand for name brand products; increase in demand for generic.

40. Review with Colander
QUIZ

41. Analyzing Demand Headlines (pkt)
Changes in Demand (pkt)

42. ELASTICITY

43. Price Increase I still buy (need) Price Increase I will not buy (want)

44. Elasticity of Demand
List an item that you would buy less of if the price increased.
List an item that you would buy more of if the price decreased.
List an item that you would continue to buy, even if the increased.

45. Inelastic vs. Elastic Demand Curve

46. Elasticity of Demand
 Elasticity of Demand –how consumers will cut back or increase their quantity demanded for a product when prices rise or fall
Measures the extent to which changes in price causes changes in
quantity demanded.
Helps determine how much a price change will influence the qd of any given product

47. Elasticity of demand P P P2 P2 P1 P1 D D QD QD

48. Elastic Demand
Elastic – consumption changes drastically when a price rises or falls
A consumer is very responsive to price changes

49. Elastic Demand Curve P
115,900
40,000
10,000 D 10
100 QD

50. Inelastic Demand Inelastic - changes in price causes a
relatively small change in quantity
demanded
 Consumers continue to purchase
regardless of price change

51. Inelastic Demand CurveP
$3.00
1.50
.50 D 2 3 QD

52. Determinants of Demand Elasticity
Need vs. a Want
Medicine versus a luxury automobile
Availability of Substitutes
Pepsi/Coke, Butter/Margarine
Importance of the Product
How much you spend on a good
Table salt versus designer clothes
Time Horizon
Longer time horizon – more elastic
Gas in the short run is inelastic, but over time elastic

53. Elastic Products
Inelastic Products

54. Item
Elastic/Inelastic
Determinant
Insulin for a diabetic
Inelastic
Need/No Available
Substitutes
Heinz 57 Tomato Sauce
Elastic
Want/ Available
Food
Need
Polo Brand Clothing
Want
Cigarettes