What would happen to the price of this worm, if millions ... · demand shift •Shifters of demand...

Do Now• This stuffed worm is so cute! Everybody wants one!

• What would happen to the price of this worm, if millions of Americans started to buy it?

• EXPLAIN!

Demand

Note Questions

What is the relationship between the price of an item and quantity demanded?

What causes demand to shift?

What is the relationship between the price of an item and quantity demanded?

Demand• The different quantities

of goods and services that consumers are willing and able to buy at different prices.

• Demand is determined by consumers wants & needs

Law of Demand

There is an inverse relationship between price and quantity demanded

Demand Curve

• Graphical representation of a product or service and the quantity wanted at a given price

Drawing a Demand Curve

• Things you must draw and label• The graph

• Label axes – price & quantity (be specific to the price of what and quantity of what)

• The demand curve should be labeled as (D1)

• On the next slide you will be drawing a demand curve in your notes it is important to make sure to label all parts

Practice

• You are provided with the following data for the demand for gasoline.

• Draw and label a demand curve using the data.

Price Quantity

5.00 0

4.50 40

4.00 50

3.500 60

3.00 70

2.50 80

2.00 90

0 100

Should Look Like This

• When prices rise or fall, the quantity (amount) demanded also changes.• Causes movement along

the demand curve• Called a change in quantity

(amount) demanded

What causes demand to shift?

Demand Shift

• All factors other than price can cause a demand shift• Shifters of demand can

cause demand curve to increase or decrease

• When demand increases – curve moves to the right

• When demand decreases – curve moves to the left

Substitutes and Complements

•2 goods can affect each other’s demands• Complements:

• 2 goods bought/used together

• Substitutes• Goods used in place

of each other

Substitutes or Complements ?

• Car and Gas

• Peanut Butter and Jelly

• Coke and Pepsi

• Syrup and Waffles

• White Bread and Whole Grain Bread

• Coffee and Tea

• Needle and Thread

Elasticity of Demand • Way consumers respond to price changes

• Inelastic – demand for good remains constant even if price increases, usually a need• Medicine

• Elastic – demand for good decreases when there is even a small price increase, usually a want • Food choices

• Depends on if there are substitutes available

• Necessities vs. Luxuries

• Can change over time

• Will vary based on the individual

Elastic or Inelastic?

• Gasoline ELASTIC | INELASTIC• Toilet Paper ELASTIC | INELASTIC• Cable ELASTIC | INELASTIC• Electricity ELASTIC | INELASTIC• Cell Phones ELASTIC | INELASTIC• Taco Bell ELASTIC | INELASTIC

Demand Shifters – non-price related changes in demand

• Tastes and Preferences• What you like?

• Number of Consumers• How many people want it b/c there are more people?

• Price of Related Goods• How much does a substitute cost?

• Disposable Income• How much extra money you have after paying taxes?

• Future Expectations• Is it going to go away or on sale?

Example #1

• Tesla truck failed to demonstrate unbreakable windows

• Will this increase or decrease demand for tesla trucks?• How will this affect the demand

curve? (left or right)

• What caused this increase or decrease (shift) in demand?

Answers:- Decrease- Left- Taste and Preferences

Example #2

• Kathryn got a management position at work

• Will this increase or decrease demand for luxury items?• How will this affect the demand

curve? (left or right)

• What caused this increase or decrease (shift) in demand?

Answers:- Increase- Right- Disposable Income

Example #3

• Kelly had 2 babies.

• Will this increase or decrease demand for kids meals at McDonald’s?• How will this affect the demand

curve? (left or right)

• What caused this increase or decrease (shift) in demand?

Answers:- Increase- Right- Number of Consumers