1. Demand

2. What is Demand?
Chapter 4, Section 1

3. What is Demand?
Demand-the desire, ability, and, willingness to buy/own a product-can compete with others who have similar demands
Microeconomics-area of economics that deals with behavior and decision making in small units, such as individuals and firms
These concepts help explain how prices are determined and how individual economic decisions are made!

4. Individual Demand Schedule/Curve
Demand Schedule-a listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time
Demand Curve-the graphic representation that shows the quantity of a good a person will buy at each different price

6. Law of Demand
Law of Demand-consumers buy more of a good when its prices decreases and less when it increases
Price is an obstacle, which discourages consumers from buying. The higher the obstacle, the less of a product they will buy

7. Market Demand Schedule/Curve
Market Demand Schedule-a table that lists the quantity of a good all consumers in a market will buy at each different price
Market Demand Curve-shows the quantities demanded by everyone who is interested in purchasing the product

9. Demand and Marginal Utility
Marginal Utility-the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product
Diminishing Marginal Utility-the extra satisfaction we get from using additional quantities of the product begins to diminish; because of diminishing satisfaction, we are not willing to pay as much for the 2nd, 3rd, 4th, and so on, as we did the 1st-therefore you are not willing to pay as much
Marginal Utility <Price ->Stop buying

10. Factors Affecting Demand
Chapter 4, Section 2

11. Factors Affecting Demand
Occasionally, something happens to change people’s willingness and ability to buy:
A change in quantity demanded
A change in demand

12. Quantity vs. Demand
Change in quantity demanded-whenever there is a movement along the demand curve symbolizing a change in the price of the product; change from point-to-point; left to show and decrease and right to show and increase
Reasoning behind this change??
Income Effect-the change in quantity demanded because of a change in price that alters consumers’ real income
Normal good-A good that consumers demand more of when their incomes increase
Inferior good-A good that consumers demand less of when their incomes increase
Substitution Effect-the change in the quantity demanded because of the change in the relative price of the product

13. Change in Demand
Change in Demand-consumers demand different amounts at every price, causing the demand curve to shift left to show an decrease or to the right to show an increase
Reasoning behind this change??
Consumer Income
Consumer Tastes
Substitutes-goods used in place of another
Complements-two goods that are bought and used together
Change in Expectations
Number of Consumers

14. Elasticity of Demand
Chapter 4, Section 3

15. Review from Last Class What does the Law of Demand state?
What are the three justifications of the Law of Demand?
What is the difference between a change in Quantity Demand and a change in Demand?
What are the 6 factors the book discusses which change demand?

16. Elasticity
Elasticity-a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price
We know that changes in price will effect the quantity that consumers demand…but the question that still exists is by how much? Large, small, or proportionate?
Elasticity allows us to examine how sensitive the quantity consumers demand will be due to the change in price

17. Elasticity of Demand
Demand Elasticity-the extent to which a change in price causes a change in quantity demanded
Elastic-When the response by consumers is one that is relatively large; very sensitive to change
Inelastic-When the response by consumers is one that is relatively small; not very sensitive to change
Unit Elastic-When the response by consumers is one that is proportional; equal to 1

18. Determinants of Demand Elasticity
What makes the demand for a specific good elastic or inelastic?
Can the purchase be delayed?
Are adequate substitutes available?
Does the purchase use a large portion of income?

19. Activity with Elasticity
I will split you up into groups of 3. Each group will be responsible for creating a poster of the 3 basic types of elasticity: elastic, inelastic, and unit elastic.
For each type, you will have a title, graph, and explanation of the graph.
Under the three graphs you will provide me with the 3 determinants of elasticity: also, explaining each and giving examples for each.

21. Gasoline from a particular station Gasoline in general
Determinants of elasticity
Fresh tomatoes, corn, or green beans
Table Salt
Gasoline from a particular station
Gasoline in general
Services of medical doctors
Insulin
Butter
Can purchase be delayed?
Are adequate substitutes available?
Does purchase use a large portion of income?
Type of elasticity