1. How the consumer influences how I make money
Demand
How the consumer influences how I make money

2. Law of Demand Part 1. As PRICE increases, DEMAND decreases
Part 2. As PRICE decreases, DEMAND increases
Price goes up
Demand goes down
THEN
Demand goes up
Price goes down
THEN

3. Demand Curve A graph that illustrates the demand for a product
It shows how much consumer desire for a product changes as the price changes

4. Market Demand Curve: This curve illustrates the quantities of apple juice demanded at each price ay all consumers in the market.
Price of a bottle of Apple Juice
Quantity demanded per week
$0.75
800
$1.00
650
$1.25
500
$1.50
350
$1.75
200
$2.00 50

5. Elasticity of Demand
The degree to which changes in price cause changes in demand or
If we change the price, will demand change a lot or a little?

6. Elastic Demand
If Demand for a good is very sensitive to changes in price, the demand is ELASTIC Or
If prices changes a little bit, demand will change a lot!

7. Example of Elastic Demand
Price of pizza goes up even a little bit, demand goes down a lot.

8. Elastic Demand for Pizza Curve is FLAT

9. Inelastic Demand
Demand for a good that consumers will continue to buy despite a price increase is INELASTIC OR
Even if price changes a lot, demand changes very little

10. Example of Inelastic Demand
The price of soap goes up a lot, the demand stays almost the same.

11. Inelastic Demand for Soap Curve is STEEP

12. Factors Affecting Elasticity
Several different factors can affect the elasticity of demand for a certain good.
1. Availability of Substitutes
If there are few substitutes for a good, the demand will not likely decrease as price increases (inelastic), the opposite (lots of substitutes) is also usually true (elastic)
Ex. Gasoline has no substitutes- inelastic
McDonalds has many (Burger King, etc)- elastic

13. Factors Affecting Elasticity (Cont.)
2. Relative Importance
Another factor determining elasticity of demand is how much of your budget you spend on the good.
Ex. Mortgage payment must be paid (inelastic)
Entertainment (movies, etc.) are elastic

14. Factors Affecting Elasticity (Cont.)
3. Necessities vs. Luxuries
Whether a person considers a good to be a necessity or luxury has a great impact on the good’s elasticity of demand for that person.
Ex. Food (inelastic)
Jewelry (elastic)

15. Factors Affecting Elasticity (Cont.)
4. Change over Time
Demand sometimes becomes more elastic over time because people can eventually find substitutes.
Ex. Blockbuster used to be the only place to rent videos (inelastic)
Netflix, Video on Demand, Pay Per View, are substitutes for Blockbuster (elastic)

16. Change in Demand
A demand curve is only accurate as long as there are no changes other than price that could affect a consumer’s decision
When factors other than price (non-price factors) affect the demand curve, the entire curve shifts to the left or to the right

17. Change in Demand: Recently, Farley High School changed boys hockey from a varsity sport to an intramural sport. As a result, they needed to buy fewer hockey pucks. The decrease in demand is shown by a shifting demand curve.

18. Non-Price Factors that effect Demand
These factors will cause the demand curve to shift to the left (less quantity demanded) or to the right (more quantity demanded)

19. 1. Change in Income
As people earn more money, the demand for luxury goods will increase
As people earn less money, the demand for luxury goods will decrease
Ex. If I win the lottery, I’ll buy a Jaguar
If I get laid off, I’ll take the bus

20. 2. Substitution Effect
If there is a substitute product, demand for an item may be influenced by the price of the substitute
Ex. If the price of butter goes up, people will substitute margarine.

21. 3. Complimentary Products
The demand for an item will increase or decrease if the price of a complimentary product (something that goes with it) increases or decreases
Ex. If the price of hot dogs goes up, the demand for hot dogs goes down, thereby decreasing the demand for hot dog buns

22. 4. Change in Attitudes
As people’s attitudes about products change, so does the demand
Ex. Fashion, music, food

23. 5. Change in Population and Demographics
Population can affect the demand of natural resources and man made resources
Demographics: Age, gender, race can affect the demand of certain items.
Ex: The Hispanic population has increases creating a demand for cultural products.

24. How does Scarcity affect Demand?
If there is a scarcity of an item, the demand goes up.
Ex. Gasoline

25. How does a boycott affect demand?
If an item is being boycotted, there is little to no demand for the item.
Ex. During the Montgomery bus boycott, there was little or no demand for the Montgomery bus system.

26. How does the War in Afghanistan affect demand?
Increased demand for war-related resources
Ex. Metal (bullets, vehicles), cloth (uniforms), gas masks
Increased demand for news
Ex. News interruptions during television shows, new news stations, internet sites.

27. Assignment
Read all scenarios and pick 3 to complete.

28. Airline Tickets
Research the price of airline ticket. Compare the price of the ticket during the holiday season and non peak times. Is there a change in price? How does the law of demand explain this scenario. Are there any substitutes?

29. Price of Medication Epipen case- read the article on
Use the law of demand to explain this case. Why are business able to do this to consumers? What is your opinion on the matter?

30. Create a Demand Chart
Think of the price of roses during the week Valentine’ Day. Create a demand graph that would illustrate how this would look.

31. Political Cartoon
Create two political cartoons that illustrate the pro’s and con’s of the law of demand.
Topics to consider: Super Bowl tickets, price of beverages and food at festivals, gas prices, medications, food items such as milk.