1. Demand
BUY LOW!

2. Demand
In Economics, demand is the willingness to buy something and the ability to pay for it.
To be able to demand something, you have to be able to buy it.
Buying power = ability to buy

3. Law of Demand
The Law of Demand states that consumers buy more of a good when the price decreases.
Consumers buy less of a good when it increases.

4. Law of Demand is a the result of…
The Substitution Effect
Consumers react to price increases by consuming less of the good and more of other goods.

5. Price of Snickers Goes Up
Substitution Effect
Price of Snickers Goes Up
Buy Something Else, like a Butterfinger, or a delicious ZERO bar.

6. Law of Demand is a the result of…
The Substitution Effect
The Income Effect
Consumers react to price increases by consuming less of the good and more of other goods.
Example: Snickers price goes up, eat Kit-Kats, Milkyways, Butterfingers, etc.
Change of consumption based on a change in income.

7. The Income Effect If you get a raise, you can buy a Mercedes Benz.
If your income decreases, buy a fuel efficient Kia.

8. Law of Demand is a the result of…
The Substitution Effect
The Income Effect
Consumers react to price increases by consuming less of the good and more of other goods.
Example: Snickers price goes up, eat Kit-Kats, Milkyways, Butterfingers, etc.
Change of consumption based on a change in income.
Example: Get a raise, buy a Benz. Decrease in income, get an old Kia.

9. Demand vs. Quantity Demanded
Demand is…the ability & willingness to purchase a good.
Quantity Demanded is the amount of a good or service demanded at a certain price.

10. Individual Demand Schedule Market Demand Schedule
The Demand Schedule
A demand schedule is a table that lists the quantity of a good a person will buy at each different price.
A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at each different price.
Demand Schedules
Individual Demand Schedule
Price of a slice of pizza
Quantity demanded per day
Market Demand Schedule
Price of a slice of pizza
Quantity demanded per day
$.50
$1.00
$1.50
$2.00
$2.50
$3.00 5 4 3 2 1
$.50
$1.00
$1.50
$2.00
$2.50
$3.00
300
250
200
150
100 50

11. Price per slice (in dollars)
The Demand Curve
Market Demand Curve
3.00
2.50
2.00
1.50
1.00
.50 50
100
150
200
250
300
350
Slices of pizza per day
Price per slice (in dollars)
A demand curve is a graphical representation of a demand schedule.
When reading a demand curve, assume all outside factors, such as income, are held constant.
Demand

12. Elasticity of Demand Elasticity is a measure of change in price.
If the price increases or decreases, how will that affect the demand of that good?

13. Elasticity of Demand
When consumers will continue to buy a product despite a price increase, the good is considered inelastic. (not elastic)
When we won’t buy a good due to price increase, the good is considered elastic.

14. Factors Affecting Elasticity
Availability of Substitute.
Cigarettes – no substitute
Candy bars – tons of substitutes
Relative importance.
Necessities vs. Luxuries
Change over time.
People will eventually find a substitute good.

15. Last Slide :D Elasticity of demand impacts revenue of firms.
If the good is very elastic, How will raising the price impact the business’s total revenue?
If they raise the price too much, they lose money.

16. The Determinants of Demand
What causes the demand curve to shift?

17. Shift in the Demand Curve
Change in Income.
Income goes up, we can buy more units of the good if the price remains the same.
Change in Consumer Expectations.
If something is cheaper today than it will be next week, buy it now!
Change in Population.
More old people, need for old people homes. Bolivians move into an area, Bolivian stores open. Etc.

18. Shifts in Demand Curve Change in Advertising.
Advertising creates consumers tastes. Kanye wears these.
People buy them.

19. Shifts in the Demand Curve
Changes in the Price of Related goods.
Complement goods: skis and ski boots.
Substitute Goods: skis and snowboards.