1. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4  12.1 Students understand common terms & concepts and economics reasoning. Standard Address 1  Explain the law of demand  Interpret a demand schedule and demand curve 4.1 - Objectives

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3. CONTEMPORARY ECONOMICS: LESSON 4.13 CHAPTER 4 Demand 4.1 4.1The Demand Curve 4.2 4.2Elasticity of Demand 4.3 4.3Changes in Demand

4. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.14 CHAPTER 4 Demand  Why are newspapers sold in vending machines that allow you to take more than one copy?  How much do you eat when you can eat all you want?  What cures spring fever?  What economic principle is behind the saying, “Been there, done that”?  Why do higher cigarette taxes cut smoking by teenagers more than by other age groups? Consider

5. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.15 LESSON 4.1 The Demand Curve  demand  law of demand  marginal utility  law of diminishing marginal utility  demand curve  quantity demanded  individual demand  market demand Key Terms

6. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.16 Demand  Demand indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant.

7. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.17 Law of Demand  The relation between price and the quantity demanded is an economic law.  The law of demand says that quantity demanded varies inversely with price, other things constant.  Thus, the higher the price, the smaller the quantity demanded.

8. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.18 Law of Demand Today's topics  Demand, wants, and needs  Substitution effect  Income effect  Diminishing marginal utility

9. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.19 Law of Demand  Demand, wants, and needs  Consumer demand and consumer wants are not the same thing.

10. © SOUTH-WESTERN I might be willing to buy certain things…

11. © SOUTH-WESTERN But, am I able to buy them?

12. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.112 Law of Demand  Substitution effect  Remember that the change in the relative price – the price of one good relative to the prices of other goods – causes the substitution effect.

13. © SOUTH-WESTERN Cereal CONTEMPORARY ECONOMICS: LESSON 4.113

14. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.114 Law of Demand  Income effect  Real income – that is, your income measured in terms of how many goods and services it can buy.

15. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.115 Law of Demand  Diminishing marginal utility  The satisfaction you derive from an additional unit of a product is called your marginal utility.

16. © SOUTH-WESTERN The satisfaction you get from a second pizza is your marginal utility of that pizza

17. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.117 Law of Demand  Diminishing marginal utility (Continue)  The Law of Diminishing marginal utility – the more of a good a person consumes per period, the smaller the increases in total utility from consuming one more unit, other things constant.  The law of diminishing marginal utility helps explain why people buy more when the price decreases.

18. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.118 814202632 Millions of pizzas per week $15 12 9 6 3 0 Price per pizza Demand Curve for Pizza a b c d e D. The schedule lists possible prices, along the quantity demanded at each price.

19. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.119 814202632 Millions of pizzas per week $15 12 9 6 3 0 Price per pizza Demand Curve for Pizza a b c d e D. The demand curves slopes downward, reflecting the Law of Demand – that is, price and quantity demanded are inversely, or negatively, related, other things constant.

20. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.120 Demand Schedule Price Quantity Demanded per Pizza per Week (millions) a$158 b1214 c920 d626 e332

21. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.121 Explain the law of demand in your own words. ?? Checkpoint Pg. 105

22. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.122 Demand Schedule and Demand Curve  When you describe demand, you must specify the units being measured and the period being considered.

23. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.123 Demand Schedule and Demand Curve  Demand versus quantity demanded  An individual point on the demand curve shows the quantity demanded.  Demand, is not a specific quantity, but the entire relation between price and quantity demanded.

24. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.124 $12 8 4 1 (c) Chris $12 8 4 12 (b) Brianna $12 8 4 Price 123 Pizzas (per week) (a) Hector Individual Demand for Pizzas d H d B d C

25. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.125 Demand Schedule and Demand Curve  Individual demand and market demand  The market demand curve shows the total quantity demanded per period by all consumers at various prices.  The market demand is simply the sum of the individual curves for all consumers in the market.

26. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.126 $12 8 4 Price 123 Pizzas (per week) (d) Market demand for pizzas 6 Market Demand for Pizzas d H d B d C D ++=