1. Activator - Demand
Three people enter a Mazda dealership all interested in buying a brand new car. All three
initially stop to look at the Mazda RX8.
The first person tells the salesperson that they “really like the RX8” but they “don’t have any money today”, and are “saving their money for a purchase within the next 6 months”.
The second person tells the dealer that they “have the money to buy”, they “are going to ultimately buy RX8”, but they are shopping various dealerships and are “not willing to buy today”.
The third person tells the dealer that they “love the RX8!”, they “have the money” and they “want to buy it today.”
List each customer (1-3). Next to each customer, write each of the following that apply to their situation:
Desire to buy
Willingness to buy
Ability to buy
Customer
Desire
Willingness
Ability 1. 2. 3.

2. Application Chart – Demand
 Indicate 3 items that you want on one side, whether
you can afford them or not in the next, and whether
you are willing to buy them in the last.
Desired Items
Willingness
Ability/Afford
Demand 1. 2. 3.

3. Demand Understanding Demand
Demand – desire, ability, and willingness to buy a good/service
The amount of a product that a consumer (individual) or group of
consumers (market) will purchase at a given price
Microeconomics – The study of the economic behavior and decision making of small units, such as individuals, families, and firms (businesses)

4. The Law of DEMAND
All things being equal, IF
THEN Q P d

5. Q P INVERSE RELATIONSHIP The Law of DEMAND d IF THEN
All things being equal,
INVERSE RELATIONSHIP IF
THEN Q P d

6. Hudsucker video

7. Hudsucker Proxy video
What elements went into the decision of the owner to change the price of the hula hoop?
2) What factors could impact your decision to demand (or not demand) a good/service?

8. The Law of Demand
Law of Demand –prices are lower, consumers will buy more; prices are higher, consumers will buy less.
Inverse relationship between price and the QD of a product.
Prices influence the amount of something that we are willing to purchase
Price
Demand
Prices of Products Decreases
Quantity Demanded Increases
Price
Demand
Prices of Product Increases
Quantity Demanded Decreases

9. Change in Quantity Demanded
$3.50
$1.00

10. Change in Quantity Demanded
$3.50
$1.00

11. Role of Consumer – DEMAND CURVE$
PRICE
QUANTITY
$ 27
3900
$ 28
2100
$ 29
1500
$ 30
1000 30
Price per Sweater 29 28 27 D
QTY
1000
2000
3000
4000
Number of Sweaters

12. INCOME EFFECT
A rise in price for the Big Mac will cause an impact to a person’s income Q P d

13. SHIFTS in the Demand Curve
Presentation 1
SHIFTS in the Demand Curve
What factors would cause a SHIFT in the demand for coffee?
Demonstrate the concept that demand can go up or down WITHOUT a change in price. (Even though the price doesn’t change, people may want more or less of a product)
$1.25 D 10 25 40

14. SHIFTS in the Demand Curve
NORMAL
GOOD -
You could buy more coffee
Income
$1.25 D 2
What would happen if you receive an increase in income? D 25 40
More coffee is demanded at $1.25

15. SHIFTS in the Demand Curve
Income
$1.25
What would happen if your income were reduced? D D 2 25 10
Less coffee is demanded at $1.25

16. SHIFTS in the Demand Curve
If you would buy the same amount of a good/service regardless of a change in income you would have a
NEUTRAL GOOD
(perhaps like toilet paper or toothpaste)
Income
INFERIOR
GOOD –
You could buy better coffee
$1.25
What would happen if your income were to increase…BUT demand went down? D D 2 25 10
Less coffee is demanded at $1.25

17. Q P SUBSTITUTION EFFECT d
If price goes up for the Big Mac, consumers will simply buy more of another good Q P d

18. Substitution Effect $3.99 $4.99 $3.99
 Substitution Effect – when consumers react to an increase in
a good’s price by consuming less of one good and more of
other goods
$3.99
$4.99
$3.99

19. The Demand Schedule Price of Ice Cream Quantity Demanded $3.00 2.50 2
Demand Schedule - a table that lists the quantity of a good that an individual will purchase at each price in a market
•Market Demand Schedule - lists the quantity of a good that all consumers will purchase at each price in the market
Price of Ice Cream
Quantity Demanded
$3.00
2.50 2
2.00 4
1.50 6
1.00 8
.50 10
.10 12
Price of Ice Cream
Quantity Demanded
$3.00
2.50 30
2.00 50
1.50
100
1.00
200
.50
300
.10
400

20. Application - The Demand Curve
Plot the points of the following schedule on the graph
Demand Curve - graphically represents the demand schedule
Demand Curve is downward sloping because of the law of demand
Price per Ice Cream Cone
$3.00
2.50
Price
Quantity
$3.00
2.50 2
2.00 4
1.50 6
1.00 8
.50 10
.25 12
2.00
1.50
1.00
0.50
Quantity Demanded of Ice-Cream Cones per week

21. Demand Curve Assignment
Explain why the curve is downward sloping
Give an example of a time that you experienced the income effect
Give an example of a time that you experienced the substitution effect
A “__________” is a table that lists the quantity of a good/service a person will buy at each price that may be offered in the market
A “_________________” is a table that lists the quantities of a good/service all consumers will buy at each price that may be offered in the market.
A “______________________” is a graphical representation of a demand schedule
The “____________________” is the effect is the change in consumption resulting from a change in income, which affects a person’s purchasing power
The “ __________________” is effect is the change in consumption resulting from a change in price of a related product, when a person can replace one item with another

22. Demand Curve Assignment
Answers
Inverse relationship
Individual Answer
Demand Schedule
Market Demand Schedule
Demand Curve
Income
Substitution

23. Demand Curve
Price (P) a
$44.50 b
$19.90 6
Quantity
Demanded (QD)

24. Movement Along the Demand Curve
• Movement – is caused by a change in the price of a product
• Changes the quantity demanded of a product
P P b a
$100 $100 a b D
$10
$10 D 10
100 QD 10
100 QD