1. Demand and Supply
Chapters 4, 5 and 6

2. Demand
demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE to BUY at each specific price at a specific time.

3. Demand Schedule: listing that shows the # demanded at different prices
Demand Schedule for Donuts
Price Quantity $ $ $ $ $ $

4. Law of Demand There is an inverse relationship between P & Q demandedOR
If p ↓, D ↑
If p ↑, D ↓

5. Substitution Effect: people tend to buy the lower priced good (assuming the same quality).

6. Marginal Utility: Extra satisfaction from getting one more unit of a product (+ demand)
Diminishing marginal utility: satisfaction starts to decrease with an additional purchase
(- demand)

7. Demand Curve
Always Downward sloping—indicating lower quantity demanded at higher prices, higher quantities at lower prices
Change in PRICE reflects movement along the curve = change in quantity demanded

8. If a change in demand is NOT caused by a change in PRICE, the entire curve will shift = change in demand = shift

9. Determinants that affect demand (other than price)
Consumer tastes (popularity)
# of buyers
Income
Substitute or Complementary Goods
Expectations (new studies show, we think something will happen in the future)

10. Demand Schedule for Donuts
Price Quantity 1 Quantity 2 $ $ $ $ $ $
Demand has increased at every price
so the curve has shifted to the right.