1. Students will be able to identify characteristics of the law of demand. Students will be able to define and/ or identify the following terms: Law of Demand Substitution Effect Income Effect

2. Look at this demand curve. What happens to quantity purchased as prices rise?

3. Why do we purchase more when a sale occurs?

4. * The law of demand states that consumers buy more of a good when its price decreases. * Conversely, consumers buy less of a good when its price increases. * Consumers love low prices.

5. It’s obvious, isn’t it? Consumers love low prices.

6. * One reason that the law of demand exists is the substitution effect. * The substitution effect occurs when a consumer reacts to an increase in a good ’ s price by buying less of that good and more of a similar yet cheaper good. * When the price of orange juice rises, consumers substitute cheaper apple juice for orange juice.

7. It really depends on the price, doesn’t it?

8. * The income effect is the change in consumption resulting from a change in income. * In other words, when prices rise, your money buys less. * Higher prices reduce your purchasing power.

9. Lower prices allow consumers to increase demand. Lower prices increase consumers’ purchasing power.

10. A demand schedule records the quantity demanded at various prices.

11. A demand schedule can easily be converted to a demand curve.

12. Economists love graphs because graphs provide easy understanding of economic concepts.

13. If a picture is worth a thousand words, a graph is worth even more.

14. * State the law of demand. * Provide an example of the substitution effect. * How does the income effect lead to the law of demand? * What is a demand schedule? * What is a demand curve? * Why do economists love graphs?