1. Demand

2. An Introduction to Demand Demand-the desire, willingness, and ability to buy a good or service For demand to exist: –A consumer must want a good or service –The consumer has to be willing to buy that good or service –The consumer must have the resources available to buy it

3. The Individual Demand Schedule Demand schedule-a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices

4. The Individual Demand Curve Demand curve-a graph that shows the amount of a product that would be bought at all possible prices in the market The curve is drawn with prices on the vertical axis and quantities on the horizontal axis

5. The Law of Demand According to the law of demand, quantity demanded and price move in opposite directions –If the demand curve slopes down it is because people are normally willing to buy less of a product if the price is high and more if the price is low

6. Individual vs. Market Demand Market demand-the total demand of all consumers for their product or service

7. Diminishing Marginal Utility Almost everything we buy provides utility –Utility-the pleasure, usefulness, or satisfaction we get from using the product Diminishing marginal utility-the principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed –Ex.)when eating pizza, you may be very hungry before you eat the first slice, and so ti will give you the most satisfaction. Because you are not quite as hungry after consuming the 1 st slice you receive less satisfaction (marginal utility) from each additional slice you eat

8. Factors Affecting Demand

9. Changes in Demand Market demand can change when: –More people enter the market –The incomes, tastes, and expectation of the consumers in the market change –Changes in the prices of related goods affect demand

10. Changes in Demand When demand goes down, people are willing to buy less of a product –In this case, the demand curve shifts left

11. Change in Demand When demand goes up, people are more willing to buy more of the same item at any given price –This makes the demand curve shift to the right

12. Changes in the Number of Consumers Demand for a good in a particular market area is related to the number of consumers in the area –The more consumers in an area, the higher the demand –The less consumers in a particular area, the lower the demand

13. Changes in Consumers’ Income Demand changes when consumers’ incomes change –With a healthy economy, consumers’ incomes increase and are more willing to spend money –When people are having economic difficulties, the less people are willing to spend

14. Changes in Consumers’ Tastes When a product becomes popular, the demand curve shifts to the right (demand goes up) and vice versa When the popularity fades, the demand curve shifts to the left (demand goes down)

15. Changes in Substitutes Substitutes-competing products When two goods are substitutes, a change in the price of one good causes the demand for the the other good to move in the same direction

16. Changes in Complements Complements-products that are used together –Ex.)computers and computer software With complementary goods, the demand for one moves in the opposite direction as the price of the other –Ex.)If computer prices rise, fewer computers will be demanded, and the demand for computer software will go down because people are buying fewer computers

17. Elasticity of Demand Demand elasticity-the extent to which a change in price causes a change in the quantity demanded When they are attractive substitutes for a good or service, demand tends to be elastic because consumers can choose to buy the substitute

18. Inelastic Demand Inelastic demand is when the price changes have little effect on the quantity demanded –Ex.)the demand for turkey at Thanksgiving tends to be inelastic The demand for goods with very few or no substitutes like gasoline is likely to be inelastic