1. Demand

2. Factors that Determine Demand
Demand is about consumers
(Supply is about producers)
Desire: Do I want it?
Ability: Can I afford it?
Willingness: Am I willing to buy it?

3. (KEH-teh-reese PARE-ree-boose)
Law of Demand
Ceteris Peribus
(KEH-teh-reese PARE-ree-boose)
“All other things being equal”
When discussing the change of the price of one G&S, we assume that nothing else has changed.
It’s like me saying “I’m retiring in 5 years, ceteris paribus.” As long as I don’t die first, or have to pay huge medical bills because one my sons actually “breaks a leg,” or some other event that would change my financial situation, that’s a true statement

4. The Law of Demand
Consumers buy more of a G&S when its price decreases and less when the price increases.
Duh!

5. Law of Demand
Quantity of a good demanded varies inversely with its price
Higher price = Lower quantity demanded
Lower price = Higher quantity demanded
PRICE
DEMAND
If, then

7. Showing Demand Two ways…
Demand Schedule: listing of various quantities of a good demanded at all prices in the market at one time

8. Showing Demand
Demand Curve (or Graph):
A graph showing schedule

9. Showing Demand Individual vs. Market Schedule/Graph
The first shows demand for one person for a G/S; the second shows demand for lots of people for a G/S
Anne’s demand for pizza
vs.
Everyone’s demand for pizza

10. Demand curves always go Got it? Demand = Down and to the Right

11. $ Qty The Y axis is always price The X axis is always quantity
Start numbering w/ zero
Qty

12. c/o 2018 Satin Jackets 35 30 25 $ 20 15 10 5 1 2 3 4 5 6 7
Qty

13. Plot the following demand schedule for Class of 2018 satin jackets
Price
Quantity 35 30 1 25 2 20 3 15 4 10 5 6 7 N
2018

14. 35 30 25 $ 20 15 10
D1 (or D1, or D1) 5 1 2 3 4 5 6 7
Qty

15. @ $20 @ $30 @ $5 3 jackets 1 jacket 6 jackets
Plot the following points on your demand curve:
@ $20
3 jackets
@ $30
1 jacket
@ $5
6 jackets

16. A change in price resulting in a change in the quantity demanded (CIQD)35 30 25 $ 20 15 10 5 1 2 3 4 5 6 7
Qty

17. SHIFT
HAPPENS $
Change happens here
Qty
and then here

18. Change in Demand (CID)
Let’s say that teachers agree to give a 100 for a test grade if you wear the jacket on test days. More students would prefer jackets, right?
Plot a new demand curve where five more jackets are demanded at each price.
Label it D2
Price
Quantity 35 5 30 6 25 7 20 8 15 9 10 11

19. 35 30 25 $ 20 D2 15 10 5 D1 1 2 3 4 5 6 7
Qty

20. A change in demand (CID) will result in the entire curve shifting35 30 25 $ 20 15 10 5 1 2 3 4 5 6 7
Qty

21. Change in Quantity Demanded vs. Change in Demand
Change in the quantity demanded
CQD
Only the original curve
Only the price changed
As price changes, quantity demanded changes
Change in demand CID
There is a new curve
Something other than price changed
At the same price, demand changes

22. What Causes a Change in Demand?
5 Determinants of Demand
Consumer income
Consumer preferences
Number of consumers changes
Price of substitutes
Consumer expectations
WARNING!
A new acronym is coming

23. Demand Curves OBJECTIVES 1. Define demand schedule and demand curve.
2. Construct a demand curve using hypothetical
data.
3. Explain why consumers buy more of a good or
service when the price decreases.
4. Explain the difference between a shift in the
demand curve and a movement along the
demand curve.

24. Label a graph like so… Price is always on the Y axis!
.40
.35
.30
PRICE per Greebe
.25
.20
.15
.10
.05 50
100
150
200
250
300
350
400
The Origin is always zero!
Quantity is always on the X axis!
QUANTITY (millions of Greebes)

25. Label a graph like so… Price is always on the Y axis!
.40
.35
.30
PRICE per Greebe
.25
.20
.15
.10
.05 50
100
150
200
250
300
350
400
The Origin is always zero!
Quantity is always on the X axis!
QUANTITY (millions of Greebes)

26. Demand for Greebes ™
($ per Greebe™) (millions of Greebes™) $
This demand schedule shows the market demand for a hypothetical product: Greebes. Plot the demand for Greebes on the axes on your demand curve graph. Label the demand curve D.

27. .40
.35
.30
PRICE per Greebe
.25
.20
.15
.10 D
.05 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

28. 1) At $0. 30 per Greebe, consumers would demand ______ million Greebes
1) At $0.30 per Greebe, consumers would demand ______ million Greebes. Ceteris paribus, if the price of Greebes increased to $0.40, consumers would demand _____ million Greebes. Such a change would be a decrease in _____ (demand or quantity demanded). Ceteris paribus, if the price of Greebes decreased to $0.20, consumers would demand _____Greebes.
150, 50, quantity demanded, 250

29. With an increase or decrease in the price of Greebes, there was a change in the quantity demanded. Using the same curve, you simply moved along the curve from one price/quantity combination. Now we’re going to look at how the whole curve will shift to the right or left representing a change in demand.

30. Greebe buyers now have less disposable income because of a increase in taxes. This change in the ceteris paribus conditions of the original demand for Greebes will result in a new set of data, shown on the following slide. Add the new demand curve on the same graph and label it D1.

31. Price Quantity Demanded
($ per Greebe) (millions of Greebes) $

32. .40
.35
.30
PRICE per Greebe
.25
.20
.15
.10 D
.05 D1 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

33. Left, smaller, lower, increase, decreased
2) The change in the demand for Greebes results in a shift of the demand curve to the ___ (left or right). This indicates that at each of the possible prices shown, buyers are now willing to buy a ___ (smaller or larger) quantity; and at each of the possible quantities shown, buyers are willing to offer a ___ (higher or lower) price. The cause of this demand curve shift was a(n) ___ (increase or decrease) in tax rates that ___ (increased or decreased) the disposable income of Greebe buyers.
Left, smaller, lower, increase, decreased

34. the change in the demand for Greebes results in a shift of the demand curve to the left.
.40
.35
.30
PRICE per Greebe
.25
.20
.15
.10 D
.05 D1 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

35. Such a shift indicates that at each of the possible prices shown, buyers are now willing to buy a smaller quantity
.40
.35
.30
PRICE per Greebe
.25
.20
.15
.10 D
.05 D1 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

36. The demand shifted to the LEFT
The demand shifted to the LEFT. This means that the change in demand was a decrease. What does it mean if the demand curve shifts to the right?

37. Now, let’s suppose that there is a dramatic change in people’s tastes and preferences for Greebes. Add the new demand curve for Greebes and label the new demand curve D2.

38. Price Quantity Demanded
($ per Greebe) (millions of Greebes) $

39. .40
.35
.30
PRICE per Greebe
.25
.20 D2
.15
.10 D
.05 D1 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

40. Right, larger, higher, increase
3) Comparing the new demand curve (D2) with the original demand curve (D), we can say that the
change in the demand for Greebes results in a shift of the demand curve to the ___ (left/right). Such a shift indicates that at each of the possible prices shown, buyers are now willing to buy
a ___ (smaller/larger) quantity; and at each of the possible quantities shown, buyers are willing to offer a ___ (lower/higher) maximum price. The cause of this shift in the demand curve was a(n) ___ (increase/decrease) in people’s tastes and preferences for Greebes.
Right, larger, higher, increase

41. The change in the demand for Greebes results in a shift of the demand curve to the right.
.40
.35
.30
PRICE per Greebe
.25
.20 D2
.15
.10 D
.05 D1 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

42. at each of the possible prices shown, buyers are now willing to buy
a larger quantity
.40
.35
.30
PRICE per Greebe
.25
.20 D2
.15
.10 D
.05 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

43. offer a higher maximum price
at each of the possible quantities shown, buyers are willing to
offer a higher maximum price
.40
.35
.30
PRICE per Greebe
.25
.20 D2
.15
.10 D
.05 50
100
150
200
250
300
350
400
QUANTITY (millions of Greebes)

44. The cause of this shift in the demand curve was an increase in people’s tastes and preferences for Greebes.
Demand before
Demand after

45. 4) Ceteris paribus, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds? (A) A decrease in consumer incomes (B) A decrease in the price of mopeds (C) An increase in the price of bicycles, a substitute for mopeds (D) An increase in people’s tastes and preferences for mopeds

46. 4) Ceteris paribus, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds? (A) A decrease in consumer incomes (B) A decrease in the price of mopeds (C) An increase in the price of bicycles, a substitute for mopeds (D) An increase in people’s tastes and preferences for mopeds

47. 5) “Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely, and using terms as they are defined by economists, choose the statement that best describes this 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, not a decrease 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.

48. 5) “Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely, and using terms as they are defined by economists, choose the statement that best describes this 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, not a decrease 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.

49. 6) “As the price of domestic automobiles has inched upward, customers have found foreign autos to be a better bargain. Consequently, domestic auto sales have been decreasing, and foreign auto sales have been increasing.”Using only the information in this quotation and assuming everything else constant, which of the following best describes this statement? (A) A shift in the demand curves for both domestic and foreign automobiles (B) A movement along the demand curves for both foreign and domestic automobiles (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

50. 6) “As the price of domestic automobiles has inched upward, customers have found foreign autos to be a better bargain. Consequently, domestic auto sales have been decreasing, and foreign auto sales have been increasing.”Using only the information in this quotation and assuming everything else constant, which of the following best describes this statement? (A) A shift in the demand curves for both domestic and foreign automobiles (B) A movement along the demand curves for both foreign and domestic automobiles (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