1. Supply & Demand
Unit 1

2. iPhone 6
Price
Quantity
$600
$300
$100

3. Milk
Price
Quantity
$2.00
$4.00
$6.00
$8.00
$10.00

4. What is Market Research?
The Big Bang Theory 5x05 - The Sword - YouTube

5. PRICE A neutral source on information Allows for change in the economy
It allows freedom of choice

6. DEMAND

7. Demand
Demand is the desire to have some good or service and the ability to pay for it.
The law of demand states that when the PRICE of a good or service GOES DOWN, consumers buy MORE, meaning demand increases.
If price goes UP, demand should DECREASE.

8. Demand Curve DEMAND CURVE Pt. Price of DVDs Quantity Demanded A $30 BB
$25 1 C
$20 2 D
$15 3 E
$10 4 F $5 5 B 25
DEMAND CURVE C 20 D 15 E 10 F 5 1 2 3 4 5
Quantity

9. Movers vs. Shifters

10. Movement on the Curve
Change in quantity demanded is a change in PRICE or QUANTIY.
This will cause you to move along the curve, up/down.
We call these “movers”

11. Change in Quantity Demand
Price B C D
Moves along the curve E F
Quantity

12. Demand Changes
Change in demand meanwhile is a change in the AMOUNT YOU BUY.
This means the curve will shift to the left or to the right.
We call these “shifters”
There are six factors that influence this.

13. Change in Demand Shifts left or right A A B Price B C C D D E E F F
Quantity

14. 6 Factors for Change in Demand

15. Substitutes
Substitutes are goods/services that can be used in place of another good or service.
If the price of a substitute changes, people may be more/less inclined to get the original item.
Examples
Pepsi or Coca Cola
Ordering Pizza or Chinese for dinner

16. Substitute’s price goes up ie. Coke Substitute’s price goes down
Pepsi
Pepsi

17. Complements
Complements are goods that are used together, so that a rise in demand in one good will increase the demand for the other good.
If a price change occurs for the complement, it will affect the demand for the original item.

18. Complement’s price goes up Complement’s price goes down
Cereal
Cereal

19. Income
People’s ability to buy certain goods is affected by their income.
If their income changes, then their ability to buy certain goods will change.
Less money means the curve will shift left, more money will shift the curve to the right. .

20. Recession hits: Lower Incomes Economic Growth: Higher Incomes
Dr. Pepper
Dr. Pepper

21. Consumer Tastes People’s tastes are constantly changing!
Advertising influences people’s tastes.

22. Terms
Normal Goods – goods consumers demand more of when their income rises.
Inferior Goods – goods that consumers demand more of when their income falls.

23. Recession hits: Generic brand goods
Economic Growth: Generic brand goods
Tops gummy bears
Tops gummy bears

24. Consumer Expectations
If you expect a product to go on sale, you wait to buy that product
Examples
Cars
Gas
Tickle-Me-Elmo
Smart Phones

25. Consumers expect price to rise Consumers expect price to fall
IPhone
IPhone

26. Market Size
The size of the market is based on the number of consumers.
Example
People leaving Buffalo has caused a smaller market size.
More people moving to Florida and Texas has created larger market sizes in these states.
If people leave a region, the market size will decrease meaning the curve will shift to the left and vice versa.

27. Bigger Population
Smaller Population

28. Elasticity of Demand
Elasticity of demand is how responsive consumers are to price changes.
Elastic demand – quantity demanded will change greatly as price changes.

29. Elastic Demand
Price
When demand is elastic, prices will not change much, but quantity demanded will change. 30 25
DEMAND CURVE A 20 B C 15 D E F 10 5 1 2 3 4 5
Quantity

30. Inelastic Demand
Price A
Inelastic demand states that quantity demanded will change little as price changes. 30 B 25
DEMAND CURVE C 20 D 15 E 10 F 5 10 20 30 40 50
Quantity

31. Factors that Determine Elasticity
Are there good substitutes?
Yes = Elastic No = Inelastic
What proportion of income does it use?
Large = Elastic Small = Inelastic
Is it a necessity or a luxury?
Luxury = elastic Necessity = inelastic