1. The Demand curve Define ‘Demand’ Define ‘Demand’ Diagrammatically show the law of ‘Demand’ Diagrammatically show the law of ‘Demand’ Explain the determinants of ‘Demand’ Explain the determinants of ‘Demand’ Understand the difference between a ‘shift in’ and a ‘movement along’ a demand curve. Understand the difference between a ‘shift in’ and a ‘movement along’ a demand curve.

2. What is Demand? The amount that consumers are willing and able to buy at a given price. The amount that consumers are willing and able to buy at a given price.

3. Draw two axis! X= quantity Y = price

4. Think! How will the amount that people wish to buy change as the price changes. How will the amount that people wish to buy change as the price changes. Now, draw that relationship on the axis. Label it Demand. Now, draw that relationship on the axis. Label it Demand.

5. Hopefully… Price Quantity Demand

6. The relationship Normally there is an inverse relationship between the price of a good, and the amount that consumers demand. Normally there is an inverse relationship between the price of a good, and the amount that consumers demand. ‘Normal goods’ ‘Normal goods’

7. Why is the Demand curve there? Demand And not here? Or here?

8. Factors that affect Demand Number of consumers Number of consumers Consumer tastes and preferences Consumer tastes and preferences Consumer incomes Consumer incomes Interest rates Interest rates Price of compliments Price of compliments Price of substitutes Price of substitutes

9. Demand for new cars Relative price of second hand cars Relative price of second hand cars Interest rates Interest rates Availability of credit Availability of credit Price of petrol etc Price of petrol etc Price of public transport Price of public transport Taxes etc Taxes etc

10. Effective demand Desire to buy is backed up by the ability to pay. Desire to buy is backed up by the ability to pay.

11. Latent Demand The consumer wants the good, but does not have the financial clout to actually buy The consumer wants the good, but does not have the financial clout to actually buy Aston Martin cars: Big latent demand! Aston Martin cars: Big latent demand!

12. Derived Demand Often the demand for a product is dependent upon the demand for another product, Often the demand for a product is dependent upon the demand for another product, E.g. Bricks: E.g. Bricks:

13. Inferior goods Not all goods follow the law of demand. These are called inferior goods. Not all goods follow the law of demand. These are called inferior goods. There are two types There are two types Giffen goods Veblin goods

14. Giffen goods Usually thought of as poor quality food stuffs. Usually thought of as poor quality food stuffs. The price goes up, so they can’t afford the other things they used to supplement it with, so buy more of the basic thing instead. The price goes up, so they can’t afford the other things they used to supplement it with, so buy more of the basic thing instead. Rice

15. Veblin goods People like some things because they are expensive. Often thought of as the ‘snob effect.’ People like some things because they are expensive. Often thought of as the ‘snob effect.’

16. Complimentary demand Demand for two products is linked. Demand for two products is linked. E.g. Mobile phones and network phone calls. E.g. Mobile phones and network phone calls.

17. Shifts in demand

18. What causes the demand curve to shift? A change in any of those determinants of demand, will lead to a new demand curve. A change in any of those determinants of demand, will lead to a new demand curve. A change in price will lead to a movement along the existing demand curve. A change in price will lead to a movement along the existing demand curve.

19. Contractions and expansions Price Demand Contraction of demand

20. Contractions and expansions Price Demand Expansion of demand quantity