1. Demand

2. Law of Demand
Demand- the amount of goods or services that a consumer is willing to buy at a specific price at a specific time
Law of Demand – an increase in price causes a decrease in overall demand
Purchasing Power- how much an individual has to spend- also influenced demand- called income effect

3. Demand Schedule of Ice Cream A table or chart listing the number of people willing to purchase good or service at a specific price
Price
$3.00
$2.50
$2.00
$1.50
$1.00
$.50
Quantity Demanded
100
200
300
400
500
600

4. Demand Curve –graphical representation of a demand schedule
Demand Curve –graphical representation of a demand schedule. The curve always slopes downward to the left P
3.00
2.50
2.00
1.50
1.00
.50 Q
100
200
300
400
500
600

5. Determinants of Demand
Causes the demand curve to shift either to the left or right
Changes in Consumer Preferences or Tastes
Market size- either increases or decreases
Income – a person gets a raise or is laid off
Prices of related goods-either substitute goods or complementary
Consumer expectations- expect to lose a job or get a raise or expect a downturn in the economy

6. Substitute effect
When consumers can substitute a cheaper good for a more expensive good they usually will
Substitute goods- goods that can easily be replaced by another ex. Coffee for tea
Complementary goods – goods that are usually sold together – ex. Tea= lemon, honey if price of one goes up demand goes down for the other good as well

7. Law of Diminishing Utility
Utility- the amount of satisfaction gained from consuming a product
Law says the more of a product you consume, the less utility you get from a good, effects demand because producers must capitalize on utility

8. Elastic Demand
When a small change in price causes of major shift in quantity demanded P
Demand for Pizza
20.00
15.00
10.00
5.00 Q
100
200
300
400
500
600

9. Inelastic Demand
When a change in price does not have a large effect on quantity demanded P
Demand for gasoline in thousands
3.00
2.50
2.00
1.50
1.00 Q 10 20 30 40 50 60