1. Agenda- 3/31 Set-up Unit 2 in your Notebook Start Ch. 4 Lecture
HW: Bookwork

2. Unit 2 – Microeconomics

3. But first, some Economic Shorthand…
Price = P
Demand = D
Quantity demanded = Qd
Income = I
Change = Δ
Goods = G
Services = S
Increase = ↑
Decrease = ↓

4. Definition of DEMAND: Ch. 4 - Demand:
Quantity of goods and services that a consumer is
WILLING & ABLE
to purchase at various prices

5. Demand Schedule:
List of quantities that would be purchased at various prices
Plotting & connecting these points, shows the Demand Curve
It shows graphically the relationship between price & quantity demanded

6. Demand Schedule Price $25 $30 $35 18 15 12
Quantity Purchased Weekly (Qd)
Price
$20
$25
$30
$35 21 18 15 12

7. Demand Curve (Inverse Relationship)
Price (P)
Demand (D)
Quantity (Qd)
Law of Demand

8. Law of Demand
The quantity demanded of a good will be higher at lower prices than the quantity demanded at higher prices
(simple ; )

9. P ↓ Qd ↑ P ↑ Qd ↓ Price goes up, Quantity Demanded goes Down
Price goes down, Quantity Demanded goes Up
(simpler)
P ↓ Qd ↑
P ↑ Qd ↓
(simplest ; )

10. Proof of the Law of Demand:
Income Effect
Substitution Effect
Marginal Utility

11. Income Effect
Effect increasing or decreasing prices has on purchasing power (less “income”)

12. Substitution Effect
Change in the combination of goods or services purchased as a result of increasing or decreasing relative prices of possible substitute products.

13. Homework (left-side) P. 92 – “Econ Analysis” p. 93 – Demand & Prices ?
p. 94 – Economic Analysis ?
P. 94 – “Reading Check”
p. 95 –Reading Check
P # 1-4

14. Agenda: 4/3 Continue Demand lecture (slides # 14-18) HW –Demand Packet
Don’t forget if you have a Current Event tomorrow
Bring a Dry Erase Pen tomorrow!!!
Wed. will be Shark Tank work day

15. Marginal Utility
Amount of satisfaction derived from one additional unit of a product
Law of diminishing marginal utility- as additional units of a product are consumed during a given period of time, the additional satisfaction derived from the good decreases

16. Law of Diminishing Marginal Utility Graph
Click below to play video
Units of Goods
Diminishing Marginal Utility
Pause on “cookie chart” and add MU & TU to shorthand

17. Change in Quantity Demanded (Qd) v. Change in Demand (D)
Caused by an increase or decrease in price
Causes a movement ALONG the demand line
In Demand
Explains why people are willing to buy more or less of a good
Causes a shift of the ENTIRE demand line

18. Homework (hold the applause)
Demand Packet –
has Vocabulary
(that will be on the test)
Applicable examples
BRING A DRY ERASE PEN TUESDAY OR LOSE POINTS!!!

19. Agenda: 4/4 Continue Demand Lecture White Board Practice ; )
HW: Demand Determinant WS
Shark Tank Tomorrow

20. Determinants of Demand
Factors that determine how much will be purchased at any given price
Demand changes even if there is no change in price
The change will shift the entire demand line

21. The Determinants (“shifters”)
Consumer income
Consumer attitude
Price of a complimentary product
Price of a substitute product
Population
Expectations
Weather
Technology
Graph

22. Change in Income
Normal goods- Demand increase as income increases (ie Coke or Pepsi)
Inferior goods- Demand decreases as income increases (ie Sam’s Club Soda vs. Coke or Pepsi)

23. Changing Attitudes Tastes and Preferences (i.e. Nike vs. Adidas)
Trends (i.e. Casual attire more acceptable in business now.)
Fads (Tattoos)

24. Changing Price of Compliments
Complimentary goods- Products that are used together (ie peanut butter and jelly.)
Decrease in the price of one can increase the demand for the other

25. Changing Price of Substitutes
Substitute goods- Products similar enough they can replace the other
Change in the price of other products causes change in demand for a good

26. Expectations
People’s expectations about the future can change demand today.
You may wait for new technology to increase quality and/or reduce price.
You may rush out and buy supplies if the weather report says a terrible storm is about to arrive.

27. population A change in the number of consumers for a product
More consumers = increased demand
Less consumers = decreased demand
Change in Qd vs Change in D

28. Change in Demand Remember: The entire line shifts!
Price (P)
Increase
Original Demand (D1)
Decrease
Quantity (Q)

29. Did someone say “Whiteboards?”
Have a whiteboard and dry-erase marker ready to graph the following examples and list the determinant.

30. Graph the effects of the popularity growth of “joggers”

31. Demand Curve: Tastes and Preferences
Price D2 D1
Quantity

32. Graph the effects of a cut in paid work hours on your demand for eating out

33. Income: demand decrease b/c your income has decreased
Price D1 D2
Quantity

34. The price of Pepsi goes up. Graph the effect on Coca-Cola

35. Substitutable Goods: Demand will go up for Coke
Price D2 D1
Quantity

36. The price of grape jelly goes down. Graph the effect on peanut butter.

37. complimentary Goods: Demand will go up for peanut butter
Price D2 D1
Quantity

38. The weather channel says there will flooding in your neighborhood tomorrow. Graph the change for demand of sand bags today.

39. Expectations: demand for sandbags increases
Price D2 D1
Quantity

40. The weather channel says there will be rain & lightning storms at the Michigan / ohio st. football game. Graph the change in demand for t-shirt apparel at the stadium at kickoff.

41. Change in Population-(less game); “Expect” to be cold – not buy t-shirts; “Preference” to not be cold
Price D1 D2
Quantity

42. The weather channel says there will be rain & lightning storms at the Michigan / ohio st. football game. Graph the change in demand for Sweathsirt/jacket apparel at the stadium at kickoff.

43. “Expect” to be cold-demand increase; jacket “population” increases; “Preference” to not be cold; “Compliments” the ticket to the game you bought – not cold ; )
Price D2 D1
Quantity

44. Demand Summary
Demand ACDC
Homework – Determinant Packet

45. Agenda- 4/7 Current Events Personal Finance Course
Shark Tank Business Plan Part I due shared with me on google docs by the end of the period
HW: Have a great Spring Break! =)

46. Price Elasticity of Demand
Measurement of the relative responsiveness of the change in quantity demanded as a result of a change in price

47. e = % Qd % P Greater than 1 = Elastic Less than 1 = Inelastic
Elasticity Equation
e = % Qd
% P
Greater than 1 = Elastic
Less than 1 = Inelastic
Exactly 1 = Unit Elastic

48. Elastic Demand Elastic implies responsiveness
(read don’t write this one) Price is elastic if calculated value of price elasticity is greater than one
As the price of a good increases the quantity demanded decreases significantly

49. Elastic Demand Schedule
Quantity Purchased Weekly %
Price % $
$ %
$ %
$ % % % %

50. Elastic Demand
Price D
Quantity

51. Inelastic Demand Inelastic implies less sensitivity to change in price
(read don’t write this one) Price inelastic if calculated value of price elasticity is less than one
As the price of a good increases the quantity demanded decreases minimally

52. Inelastic Demand Schedule
Quantity Purchased Weekly %
Price % $
$ %
$ %
$ % % % %

53. Inelastic Demand
Price D
Quantity

54. Determinants of Price Elasticity (Write the black, read the red)
Elasticity of Demand (stop at 3:11)
Determinants of Price Elasticity (Write the black, read the red)
Number of substitutes (more substitutes then more elastic; less substitutes, then more inelastic)
Importance of product in consumer’s budget (small fraction of budget then price elastic)
Time period considered (shorter time period then more inelastic demand)

55. Total Revenue
Total amount of money a company receives from its sales – or:
Total Revenue = price x quantity sold (TR=PxQ sold)
Quantity sold is dependent on price

56. Relationship between Price, Elasticity, Total Revenue
Elastic Demand
Inelastic Demand
Decreasing Price Increases Total Revenue
Decreasing Price Decreases Total Revenue
P = TR
P = TR
Increasing Price Decreases Total Revenue
Increasing Price Increases Total Revenue
P = TR
P = TR

57. Ch. 4 book assignment – Page 112 – 113 # 19, 20, 22, 24, 29, 30
Quiz on Thursday – no notebook turn in
Current Events will be moved to Friday before we start working on Shark Tank