1. Unit 3: Microeconomics
Lesson 1: Demand

2. Definitions
Demand: the amount of a good or service that consumers are willing and able to buy at various prices during a period of time
Quantity Demanded: the amount of a good or service that consumers are willing and able to buy at a particular price during a period of time

3. Definitions
Law of Demand: an increase in the price of a good or service causes a decrease in the quantity demanded; vice-versa
● Price is the main variable that affects demand
● An inverse or negative relationship exists between price and quantity demanded

4. Definitions
4. Demand Schedule: a table that lists the quantity of a good or service that consumers are willing and able to buy at particular prices

5. Demand Schedule Price per pair of Shoes Quantity Demanded $60.00 1,500
$50.00
2,250 B
$40.00
3,000 C
$30.00
3,750 D
$20.00
4,750 E

6. Definitions
5. Demand Curve: a graphic illustration of a demand schedule

7. Pairs of Shoes (Thousands)
Demand Curve P 70 60 50 40 30 20 10
● A
● B
● C $
● D
● E D1
Pairs of Shoes (Thousands) Q

8. Shift in Demand Only price affects demand in a given period of time
Factors other than price can affect demand and shift the curve over time
● Increase in demand = curve shifts right
● Decrease in demand = curve shifts left

9. Shifts in Demand Determinants (Reasons for Change)
● Consumer taste or preference
● Size of the market
● Income

10. Shifts in Demand Determinants (Reasons for Change)
● Price of complementary goods
● Price of substitute goods
● Consumer expectations

11. (Pairs of Shoes) Thousands
Increase in Demand P 70 60 50 40 30 20 10 $ D1 D2
(Pairs of Shoes) Thousands Q

12. (Pairs of Shoes) Thousands
Decrease in Demand P 70 60 50 40 30 20 10 $ D3 D1
(Pairs of Shoes) Thousands Q

13. Elasticity of Demand
Demand Elasticity: the degree to which a change in the price of a good or service affects the quantity demanded

14. Elasticity of Demand
Elastic Demand: a small change in the price of a good or service causes a major change in the quantity demanded
● Product is not a necessity
● Substitute goods are readily available
● Cost of product represents a large percentage of consumers’ income

15. Elastic Demand P
3.5
3.0
2.5
2.0
1.5
1.0
0.5 $ D1
Thousands Q

16. Elasticity of Demand
Inelastic Demand: a change in the price of a good or service has little impact on the quantity demanded
● Product is a necessity
● Few, if any, substitute goods available
● Cost of product represents a small portion of consumers’ income

17. Inelastic Demand P
5.00
4.50
4.00
3.50
3.00
2.50
2.00 $ D1
Thousands Q