1. Demand Section 1 – Nature of Demand
Chapter 4
Demand
Section 1 – Nature of Demand

2. Quantity Demand
The amount of a good or a service that a person is willing and able to buy at each particular price

3. Law of Demand
Increase in a goods price causes a decrease in the quantity demanded.
A decrease in a goods price causes an increase in the quantity demanded.
INVERSE RELATIONSHIP
Price
Quantity Demanded

4. Income / Substitution Effect
Income Effect –
the amount of money, or income, that people have available to spend on goods and services is called their purchasing power. Any increase or decreases in a persons purchasing power caused by change in price is called the income effect.
Substitution Effect –
the tendency of consumers to substitute a similar, lower priced product for another product.
Example – Dr. Pepper and Dr. Skipper

5. Diminishing Marginal Utility
The more units consumed of one item, the amount of satisfaction received declines.
A New Car

6. Demand Curve Plots the information on the demand schedule. PRICE
Quantity Demanded

7. Pay attention boys and girls!
Bartz’s Demand Slope
Slope = Change in Y / Change in X
Pay attention boys and girls!

8. Slope Slope = rise = change in vertical axis = y
run change in horizontal axis x
Example - slope = -5 25
What does this mean?
If my price is lowered 5 $ then there would be 25 more products demanded by the public.

9. Determinants of Demand
Consumer taste and preferences
Potential consumers
Money income
Complementary and substitute Goods
Price Expectations

10. Supply A willingness to sell a product at a certain price
Law of Supply – People will sell more of a product at a higher price than a lower a price.

11. Supply Schedule PRICE AND QUANTITY SUPPLIED ARE DIRECTLY RELATED
As one goes up the other goes up! QS P

12. Supply Curve Plots the information from the supply schedule
Price
Q/S

13. Determinants of Supply
Resource Prices
Production Technology
Labor Productivity
Taxes, Subsidies, Regulations

14. Increase in Supply
Curve shifts to the right
Price
Q/S

15. Decrease in Supply
Shift to the Left
Price
Q/S

16. Combine Demand and Supply
Price
Market Equilibrium D
Quantity

17. Market Equilibrium Point that supply meets demand…
Point that the price is determined… S
The supplier should make 1000 and sell the item for 5$ 5
Price D
1000
Quantity