1. How much would you pay? 1 cow? 3 stocking hats?
1 bag of Jolly Ranchers?
2 tickets to Las Vegas?
An A in economics ?

2. Topic 3 – Demand, Supply and Prices

3. Microeconomics
Studies how the individual parts of the economy make decisions to allocate limited resources in markets where good or services are being bought and sold.

4. DEMAND
Topic 3 – Lesson 3

5. Would you pay $1 for a slice of pizza?
Demand – The desire to own something and the ability to pay for it
Words to associate with demand:
Consumers

6. Law of Demand – INVERSE RELATIONSHIP
As price decreases, demand increases
As price increases, demand decreases

7. What do the points on this graph represent?

8. Change in QUANTITY DEMANDED
Only a change in PRICE! Can move you along the demand curve
This is called a CHANGE IN QUANTITY DEMANDED

9. If something other than price changes… CHANGE IN DEMAND

10. 5 Factors that Shift The Demand
Change in the Number of Buyers
Population, migration
Change in values: Consumer Tastes
Trends, fads, good or bad reviews

11. 5 Factors that Shift Demand Curve
3. Change in values: Consumer Income
Normal good….demand more as income rises
Inferior good….demand less as income rises
4. Change in values: Price of other goods
Compliments…….peanut butter and jelly prices
Substitutes……….chicken or beef
5. Change in values: Expectations
Will there be a sale soon?

12. Elasticity How responsive consumers are to price changes
How much will a buyer cut back or increase their demand for a good when the price rises or falls?

13. Demand for a good that you will keep buying despite a price increase.
Inelastic
Elastic
Demand for a good that you will keep buying despite a price increase.
Price change has little impact on demand
Ex: Gas, Cigarettes, Coffee, Medicine
Demand is much less for a good after a small price increase.
Price change has impact on demand
Ex: Luxury Items

14. Factors Affecting Elasticity What is essential
Factors Affecting Elasticity What is essential? What goods must I have, even if the price rises greatly?
Availability of substitutes
If there are few (ex. Concert ticket)?
If there are lots?
Relative Importance
How much do you spend on a particular good?
Necessities vs. Luxuries
Toothpaste? Calamari?

15. ELASTIC OR INELASTIC?