1. Your Wish can be Your Demand!

2. Who Want’s One?

3. What is Demand?

4. What is DEMAND?
DESIRE!

5. What is DEMAND?
Willingness to Pay
and the
Ability to Pay

6. What does it Mean?
Demand = the willingness and the ability to pay for goods and services.
Prices = tools market uses to coordinate individual desires.

7. Schedules & Curves Demand vs. quantity demanded
Individual demand vs. market demand

8. Demand Schedule a $15 8 b 12 14 c 9 20 d 6 26 e 3 32
Price Quantity Demanded
per Pizza per Week (millions)
a $15 8
b 12 14
c 9 20
d 6 26
e 3 32

9. Demand Curve for Pizza 8 14 20 26 32
Millions of pizzas per week
$15 12 9 6 3
Price per pizza a b c d e D

10. Individual Demand for Pizzas
$12 8 4
Price 1 2 3
Pizzas (per week)
(a) Hector
$12 8 4 1 2
(b) Brianna
$12 8 4 1
(c) Chris d H d B d C

11. Market Demand for Pizzas
$12 8 4
Price 1 2 3
Pizzas (per week)
(d) Market demand for pizzas 6 d H B C D + =

12. DEMAND: Curve vs Schedule
Shows the relationship
Between Price and
Quantity Demanded!
Your subtopics go here

13. What quantity of apple juice does Reiko demand at $2 a bottle
What quantity of apple juice does Reiko demand at $2 a bottle? What quantity of apple juice does Reiko demand at $1 a bottle? 4
Your subtopics go here

14. If the price of a bottle of apple juice went from $1. 50 to $1
If the price of a bottle of apple juice went from $1.50 to $1.00, how would that affect the quantity of bottles Reiko would demand?
Your subtopics go here

15. DEMAND vs Quantity DEMANDED
entire graph
Quantity demanded at
ALL prices
Quantity Demanded =
Points on the curve
Your subtopics go here

16. What is the Law of Demand?
What is the relationship between price and quantity demanded?

17. As $  QTY Demanded  As $  QTY Demanded 
Law of Demand
There is an inverse relationship between price and quantity demanded.
Ceteris Paribus
All things remaining constant
As Price increases Quantity demanded decreases
As Price decreases, Quantity demanded increases
As $  QTY Demanded  As $  QTY Demanded 

18. As price increases, quantity demanded decreases As price decreases, quantity demanded increases As $  QTY Demanded  As $  QTY Demanded 

19. Demand Curve A graphic way to illustrates the law of demand
slopes downward and to the right

20. What Accounts for the Law of Demand?
WHY?
What Accounts for the Law of Demand?

21. What accounts for the law of demand?
WHY?
What accounts for the law of demand?
Income effect
Demand changes for some items when a consumer’s income changes
Substitution effect
People tend to substitute for goods whose price has gone up.
Diminishing marginal utility
Usefulness of goods lessens with each additional unit you acquire

22. Demand changes for some items when a consumer’s income changes
INCOME EFFECT
Demand changes for some items when a consumer’s income changes
Normal Goods – any good whose demand increases when income increases
 income = demand for the good/service
Inferior Goods – any good whose demand decreases when income increases
 income = demand for the good/service

23. People tend to substitute for goods whose price has gone up.
Substitution Effect
People tend to substitute for goods whose price has gone up.
Substitute: A product or service that can take the place of another product or service
Complement: A good or service that is used in conjunction with another good or service

24. Diminishing Marginal Utility
What Does It Mean?
The usefulness of goods lessens with each addition unit you acquire
Example:
You just returned from two days on a deserted island with no food or water.

25. Quantity Demanded v. Demand
Shifting Curves
Vs.
Movement Along the curve

26. Movement Along a Curve vs. a Shift of the Curve
A change in price, other things constant, causes a movement along a demand curve, changing the quantity demanded.
A change in one of the determinants of demand other than price causes a shift of a demand curve, changing demand.

27. Movement Along a Curve
A graphical representation of the effect of a change in price on the quantity demanded.
Movement from one point on the line to another point

28. Change in QUANTITY Demanded
100
200 $1 $2
Quantity Demanded
Price
Pizza Market
The price increases from $1 to $2
Quantity Demanded changes from 200 to 100!
DEMAND itself did not change!
Only move from one point to another! D

29. Change in QUANTITY Demanded
CAUSED by a
CHANGE IN PRICE ONLY!

30. Change in QUANTITY Demanded
Pizza Market
Effect:
MOVEMENT from one point on the curve to another
Quantity Demanded
Price $2 $1 D
100
200

31. Shifting Curve
A graphical representation of the effect of anything other than price on demand
This is known as a CHANGE IN DEMAND

32. Change in Demand The price a substitute increases.
Pizza Market
The price a substitute increases.
Quantity Demanded changed at every price!
NEW CURVE! $2
Price $1 D D1
100
200
300
Quantity Demanded

33. Change in Demand A change in something OTHER THAN THE PRICE!!!!
Quantity Demanded
100
200
300
Price $1 $2
Pizza Market
Pizza Market
Caused by:
A change in something OTHER THAN THE PRICE!!!! $2
Price $1 D D1

34. Change in Demand SHIFT of the curve Creation of a new curve EFFECT: D
Pizza Market
EFFECT:
SHIFT of the curve
Creation of a new curve $2
Price $1 D D1
100
200
300
Quantity Demanded

35. Change in Demand Shift to the Left = decrease in demand
Pizza Market
Shift to the Left = decrease in demand
Shift to the RIGHT = INCREASE in demand $2
Price $1 D D1
100
200
300
Quantity Demanded

36. Determinants of Demand
What Causes a shift in the Demand Curve?

37. Determinants of Demand
POPULATION
 In # of buyers = Demand 
In # of buyers = Demand 
Example: increase in immigration; plague

38. Determinants of Demand
INCOME
 in Income = Demand 
 in income = Demand 

39. Determinants of Demand
PREFERENCES
If something is a fad = D 
When something goes out of style = D 

40. Determinants of Demand
EXPECTATIONS
Expect $ to  = Demand today 
Expect $ to  = Demand today 
Example: If expect price of Coke to triple tomorrow, we will buy more Cokes today while they are cheaper

41. Determinants of Demand
RELATED GOODS Price of Complementary Goods
When the price of a complement good falls, demand rises for the good whose price has not changed.
 In $ of complement = Demand 
in $ of complement = Demand 
Example: If price of hot dogs increases, then Demand for hot dog buns will decrease

42. Determinants of Demand
Change in Price of Substitutes
When the price of a substitute good falls, demand falls for the good whose price has not changed.
 in $ of substitute = Demand 
 in $ of substitute = Demand 
Example: If the price of Coke increases, then the demand for Pepsi will increase.

43. Turn to back of your predictions and complete the chart for homework.
Let’s Practice!
DEMAND
Shifting Scenarios
Turn to back of your predictions and complete the chart for homework.

44. DEMAND SHIFTING SCENARIOS
Event
2. Product
3. Demand Shift
4. Determinant
The price of steak increases.
Hamburger
Right
b. Price of substitutes
Low-fat diets grow in popularity.
Fresh grapes
e. Tastes and preferences
Disney World increases admission prices.
Hotel rooms near Disney World.
Left
d. Price of complements
The price of eggs falls.
Bacon
A hard freeze destroys much of the future orange crop.
Orange juice
f. Expectations
The price of gasoline increases dramatically
SUVs
f. Price of complements

45. Let’s Practice as a Class!
Get out a piece of paper and draw a large arrow

46. What Happens to Demand If…
The Scenario:
You go to your favorite burger place.
The price of your favorite burger has increased, but the price of the chicken sandwich is the same.
Over the course of the week, you generally buy both burgers and chicken sandwiches.
How will the increase in price of a burger affect your purchase of burgers?
How does the substitution effect change your purchases?
How does the income effect change your purchases?

47. What Happens to Demand IF…
You are the owner of a hotdog making company…
people change their preference from hamburgers to hot dogs?
Price D1 D
QTY Demanded

48. What Happens to Demand IF…
You are the owner of a hotdog making company…
US negotiates a deal with China to trade hot dogs for egg rolls
Price D1 D
QTY Demanded

49. What Happens to Demand IF…
You are the owner of a hotdog making company…
the price of ground beef plummets
Price D D1
QTY Demanded

50. What Happens to Demand IF…
You are the owner of a hotdog making company…
the price of hotdogs decreases
Price D
QTY Demanded

51. What Happens to Demand IF…
You are the owner of a hotdog making company…
At the beginning of summer, the price of hot dogs usually increases. It is now May.
Price D1 D
QTY Demanded

52. What Happens to Demand IF…
You are the owner of a hotdog making company…
the minimum wage rises
NO CHANGE IMMEDIATELY!
This Affects Supply since it is a cost of production
Price D
QTY Demanded

53. What Happens to Demand IF…
You are the owner of a hotdog making company…
the MWU threatens to strike if owners fail to meet their demands
NO CHANGE IMMEDIATELY!
This Affects Supply since it threatens production of goods
Price D
QTY Demanded

54. What Happens to Demand IF…
You are the owner of a hotdog making company…
unemployment hits an all-time high
Price D D1
QTY Demanded

55. What Happens to Demand IF…
You are the owner of a hotdog making company…
the price of buns increases due to wheat shortage
Price D D1
QTY Demanded

56. Worksheet: Reasons for Changes in Demand
Let’s Practice!
Worksheet:
Reasons for
Changes in Demand

57. We Demand More Practice!
Demand Shifters
Complete the odd ones now with a partner.
When complete, complete the even ones on your own.

58.   PREFERENCE 1. Harry Potter movies increase interest in the books.
 
$ Price D
Quantity Demanded
Harry Potter Books
Results in an
in QTY DEMANDED
DEMAND
What caused the movement/ shift? D1
PREFERENCE

59. Motor Scooters w/high MPG
2. Gas prices have risen to new high levels.
 
$ Price D
Quantity Demanded
Motor Scooters w/high MPG
Results in an
in QTY DEMANDED
DEMAND
What caused the movement/ shift? D1
Change in price
Of Complement

60. QUIZ TIME!