1. Demand Chapter 4 1

2. This is one of the most important cows all year! 2

3. Connection to Circular Flow Model 1.Do individuals supply or demand? 2.Do businesses supply or demand? 3.Who demands in the product market? 4.Who supplies in the product market? 3

4. 4

5. 5

6. DEMAND DEFINED What is Demand? Demand is the different quantities of goods that consumers are willing and able to buy at different prices. (Ex: Bill Gates is able to purchase a Ferrari, but if he isn’t willing he has NO demand for one) What is the Law of Demand? There is an INVERSE relationship between price and quantity demanded 6

7. LAW OF DEMAND As Price Falls… …Quantity Demanded Rises As Price Rises… …Quantity Demanded Falls Price Quantity Demanded 7

8. Example of Demand I am willing to sell several A’s in Economics. How much will you pay? PriceQuantity Demanded Demand Schedule 8

9. Graphing Demand 9

10. The Demand Curve A demand curve is a graphical representation of a demand schedule. The demand curve is downward sloping showing the inverse relationship between price (on the y-axis) and quantity demanded (on the x-axis) When reading a demand curve, assume all outside factors, such as income, are held constant. (This is called ceteris paribus) Let’s draw a new demand curve for cereal… 10

11. GRAPHING DEMAND Q o $5 4 3 2 1 Price of Cereal Quantity of Cereal Demand Schedule 10 20 30 40 50 60 70 80 Draw this large in your notes 11 Price Quantity Demanded $510 $420 $330 $250 $180

12. GRAPHING DEMAND Q o $5 4 3 2 1 Price of Cereal Quantity of Cereal Demand Schedule 10 20 30 40 50 60 70 80 12 Price Quantity Demanded $510 $420 $330 $250 $180 Demand

13. Where do you get the Market Demand? Q Billy PriceQ Demd $51 $42 $33 $25 $17 JeanOther Individuals PriceQ Demd $50 $41 $32 $23 $15 PriceQ Demd $59 $417 $325 $242 $168 PriceQ Demd $510 $420 $330 $250 $180 Market 3 P Q 2 P Q 25 P Q 30 P $3 DDDD

14. 14