1. Chapter 4 Section 1

2. Demand Schedule PriceQuantity Demanded 1.004 2.003 3.002 4.001 Always compare price and quantity demanded Is typically for a single goods or service Ex. Slice of pizza

3. Definition Demand The desire to own something and the ability to pay for it DEMAND As the price of a good goes down… As the price of a good goes up… Law of Demand Demand goes up Demand goes down

4. The Law of Demand Consumers will buy more of a good when its price is lower and less when its price is higher Substitution Effect When consumers react to an increase in a good’s price by consuming less of that good and more of a substitute good Income Effect The change in consumption that results when a price increase causes a real income to decline

5. Demand Graph Demand As the Price of a good goes down… As the Price of a good goes up… Substitution EffectConsumers substitute that good for other goods Consumers substitute other goods for that good Income EffectDemand goes upDemand goes down

6. Law of Demand in Action Price of A IncreasesPrice of A Decreases Consumption Of A Consumption of other goods Consumption of A Consumption of other goods Income Effect Substitution Effect Combined Effect