1. Agenda 10 minutes to get your binders together
Turn in your demand homework from Thursday
*1st place has traded 38 total times!
*but, last place has traded 34 times…

2. DEMAND

3. Recap: What’s diminishing marginal utility?
The extra satisfaction we get form using additional quantities of the product begins to decline
Turn in your homework from Thursday – demand exercises

4. Warm up
What are some goods and services that you would like to have? (want)
Desire: a strong feeling of wanting something
Ability: do you have enough money to buy those things?
Which items do you not have the ability to buy?
Willingness: I choose spend your money
Which items do you not have the willingness to buy?
Then, erase those

5. Just because you want something doesn’t mean you demand something!

6. Demand: economic definition
Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service.
Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa.
Inverse relationship between price and quantity demanded of a good

7. Demand
If you wanted to open a business, how would you predict demand for your product?
What role does price play in demand?

8. Surveying demand
Groups of 4 – but new groups!
Meet your peers 

9. Surveying demand For your good/service:
Decide as a group the highest price that you would pay for that good or service
Be ready to advertise your product to the class – at that price
But also, be prepared with four other reasonable prices that you would pay for that good or service

10. Advertising your good/service
Who wants to go first?

11. Agenda Why do demand curves look the way they do?
Change in quantity demanded vs. change in demand

12. To qualify as demand, the consumer must…
Desire
Be willing to pay
Have the ability to pay

13. Warm up discussion
Why do we purchase more when a sale occurs?

14. Warm up: surveying demand
Drake announced a secret show happening TOMORROW, in Denver, for ONE NIGHT ONLY. You got the news before anyone else.
What would you pay for one ticket?

15. Surveying demand
Market demand curves: the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product
How many would you buy at this price?

16. Predict:
Based on these results, what’s the law of demand?

17. The Law of Demand
The law of demand states that consumers buy more of a good when its price decreases
Conversely, consumers buy less of a good when its price increases
Basically… consumers love low prices

18. Surveying demand
Change in quantity demanded: when only the price changes, but everything else remains constant
Aka – moving ALONG the demand curve
Inverse relationship: when price increases, quantity demanded decreases
How many would you buy at this price?

19. Change in Quantity Demanded Looks Like This:
How many would you buy at this price?

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

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

22. A change in price alone can never change demand.
Say it with me:
A change in price alone can never change demand.
It would ONLY change quantity demanded

23. What about a shift in the demand curve?
Aka – how do you move the whole line, not just along the line?

24. Demand curve When a demand curve shifts, it moves
Price can never shift a demand curve because price is in the demand curve
To shift a demand curve, it must be some factor other than price

25. Demand curve
When a shift in the demand curve occurs, price decreases or increases at every level

26. Demand curve
If the curve shifts left, left means less. Demand has decreased at every price level.
If the curve shifts right, right means more. Demand has increased at every price level.

27. Quick discussion
Predict: what can shift a demand curve?

28. An increase in demand (not quantity demanded, but demand) looks like…

29. TIRES! Predict: what can shift a demand curve? Tastes and preferences
Income
Related products
Expectations for the future
Size of population

30. Tastes and preferences
Diminishing marginal utility- at some point, consumers do not want or need more of an item
That’s why diversification and selling related products are both important to businesses
Brad and Reese’s
Also, advertising, social trends, popularity, maturity, etc
What has the slow increase in health consciousness caused?

31. Income
The income effect is the change in consumption resulting from a change in income.
In other words, when prices rise, your money buys less.
Higher prices reduce your purchasing power.
This causes an effect in the business cycle – we’ll get there

32. Related products Substitute
Consumers tend to purchase a substitute good – a less expensive, but similar product – when prices go up. This is called the substitution effect.
Example?
When the price of steak goes up, the demand for ground beef rises
When the price of orange juice rises, consumers substitute cheaper apple juice for orange juice

33. Give an example of a substitute for the following…
Remember, substitutes are purchased in place of another item when its prices rise
Coffee

34. Give an example of a substitute for the following…
Remember, substitutes are purchased in place of another item when its prices rise
Hot dogs

35. Give an example of a substitute for the following…
Remember, substitutes are purchased in place of another item when its prices rise
Butter

36. Give an example of a substitute for the following…
Remember, substitutes are purchased in place of another item when its prices rise
Netflix

37. Give an example of a substitute for the following…
Remember, substitutes are purchased in place of another item when its prices rise
Movie tickets

38. Related products Complements
A good that is generally used with another good
The use of one good increases the use of the other good
Example?
Gasoline and cars
Computers and software
Draw it out on the board – the prices for computer. If it increases, what happens to the demand for software?

39. Give an example of a complement for the following…
Remember, a rise/fall in the original good will cause a rise/fall in the complementary good
Coffee

40. Give an example of a complement for the following…
Remember, a rise/fall in the original good will cause a rise/fall in the complementary good
College tuition

41. Expectations for the future
Expectation about the future affects current prices and demand
Think back to the business cycle
If you know the next iPhone is coming out in one year, what might you not do this year?
Or – if you know a massive hurricane is coming, what do you do?

42. Size of the population The more people, the more demand (in theory)
A group of 10,000 Canadians move to Greenwood Village. How might that affect the demand curve for maple syrup?

43. An increase in demand (not quantity demanded, but demand) looks like…

44. An decrease in demand (not quantity demanded, but demand) looks like…