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Bellringer—Each partner pair should retrieve the following from the back of the room. You have one minute after the bell rings to be in your seat with the materials.
1 small whiteboard1 black dry erase marker1 color (other than black) dry erase markerSock eraser
Put these under your desk.
Friday, August 23, 2013
What is the difference between a change in demand and a change in quantity demanded? Be able to graphically apply the determinants of demand.
Agenda1.Demonstration2.Lecture3.Whiteboard Practice Problems4.Group Project
Law of Demand—As prices decrease, the QUANTITY demanded
INCREASES As prices increase, the QUANTITY demanded
DECREASES
DemandP
rice s
QD
Pri
ce s QD
Demand Schedule—a table that lists the various quantities demanders will purchase at various prices.
Demand Curve—schedule in graph formIndividual—one person’s demand for a
productMarket—a group’s demand for a product
Tools to show demand
Price Quantity
$2.00 0
$1.50 1
$1.00 2
$0.50 3
.50
1.00
1.50
2.00
1 2 3 4
Pric
e
Quantity
Demand for Pizza
Quantity Demanded—ONE quantity at ONE priceDemand—List of quantities at different prices
illustrated by a demand schedule and a demand curve.
Difference between QD and D
Demand Schedules
Individual Demand Schedule
Price of a slice of pizza
Quantity demanded per day
$.50$1.00$1.50$2.00$2.50$3.00
543210
Market Demand Schedule
Price of a slice of pizza
Quantity demanded per day
$.50$1.00$1.50$2.00$2.50$3.00
30025020015010050
Difference between QD and D
Market Demand Curve
3.00
2.50
2.00
1.50
1.00
.50
0
0 50 100 150 200 250 300 350Slices of pizza per day
Pri
ce p
er
slic
e (
in
doll
ars
)
Demand
Change in QUANTITY demanded Movement along the demand curveCaused by a change in the PRICE of the
productChange in DEMAND
Shift of the entire curveCaused by one of the determinants of demand
Difference between QD and D
Factors that shift the demand curveTaste and PreferencesRelated goods—prices of substitutes and
complementsIncomeBuyers—Number of buyersExpectations—CONSUMER expectations
Demand Determinants
Shifts the curve LEFT or RIGHT
NOT up or downIf demand
INCREASES, the demand curve shifts to the RIGHT
If demand DECREASES, the demand curve shifts to the LEFT
Change in Demand
6
5
4
3
2
1
0
Quantity Demanded (bushels per week)
Pri
ce (
per
bu
shel)
P
Q
D1
2 4 6 8 10 12 14 16 18
Increase in Demand
Decrease in Demand
D2
D3
Taste and Preference
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
Decreasein demand
A popular new diet forbids dairy
D1D2
Substitutes
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
Decreasein demand
The price of frozen yogurt drops
D1D2
Complements
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream
Quantity of Ice-Cream
0
Increasein demand
D1D2
The price of cake drops
Consumer IncomeNormal Good (demand ________ when income increases)
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
Increasein demand
An increase
in income...
D1D2
Exception to Consumer IncomeInferior good: demand decreases when
income increases.
P
Mrs. Powell’s demand for Wal-mart brand ice cream decreases after she receives a $10,000 pay increase
D1D2
Q
Number of Buyers
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
Increasein demand
MTSU increases attendanc
e by 10,000
D1D2
Expectations
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10 1211
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
Decreasein demand
Ben & Jerry’s offers a FREE ice cream cone on Sunday. This is the demand curve for FRIDAY.
D1D2
Draw a demand and supply graph in black (brown).
Title it “Beef Consumption in May.” You do not need numbers on the graph.
Practice Problems
Pop Quiz—
(Points 1-3) Draw a demand and supply graph for Beef Consumption in MAY. Point 1. Axes are labeled correctly and original D curve is in the correct shape. ONE will be a no shift.
4. Price of beef expected to rise in June.
5. Millions of immigrants swell the US population
6. Pork prices drop
7. Mad Cow disease comes to the US
8. Beef prices fall. Consumers buy more.
9. Real income for US drops for 3rd month
10. Charcoal prices go up (You will only eat burgers the right way—on a charcoal fired grill!!!)
11. When demand increases, what happens to the equilibrium price and equilibrium quantity.
12. When demand decreases, what happens to the EP and EQ?
13. Explain the difference b/wn a shift in the demand curve and a movement along the demand curve. In other words, what causes each?
Group PracticeDraw a demand and supply graph for a
product in one color. Show an increase and a decrease in demand
in different colors. Write out 6 scenarios. One for each
determinant and one that doesn’t change demand. You may write it on the poster or on your own notebook paper. DON’T write down the ANSWER on the poster.
1-2 people in charge of drawing/writing. 2-3 people in charge of scenarios.
“Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely, and using terms as they are defined by economists, choose the statement that best describes this quotation.
(A) The quotation is correct: An increase in price always causes a decrease in demand.
(B) The quotation is incorrect: An increase in price always causes an increase in demand, not a decrease in demand.
(C) The quotation is incorrect: An increase in price causes a decrease in the quantity demanded, not a decrease in demand.
(D) The quotation is incorrect: An increase in price causes an increase in the quantity demanded, not a decrease in demand.
Other things constant, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds?
(A) A decrease in consumer incomes(B) A decrease in the price of mopeds(C) An increase in the price of bicycles(D) An increase in people’s tastes and
preferences for mopeds
“As the price of domestic automobiles has inched upward, customers have found foreign autos to be a better bargain. Consequently, domestic auto sales have been decreasing, and foreign auto sales have been increasing.” Using only the information in this quotation and assuming everything else constant, which of the following best describes this statement?
(A) A shift in the demand curves for both domestic and foreign automobiles
(B) A movement along the demand curves for both foreign and domestic automobiles
(C) A movement along the demand curve for domestic autos, and a shift in the demand curve for foreign autos
(D) A shift in the demand curve for domestic autos, and a movement along the demand curve for foreign autos
Which of the following would increase demand for a normal good? A decrease in:
a. Priceb. Incomec. The price of a substituted. Consumer taste for a good. e. The price of a complement
A decrease in the price of butter would most likely decrease the demand for
A. margarineB. BagelsC. Jelly D. Milk E. Syrup
Card #3 DemandDraw a demand and supply graph for a
product. Show an increase in demand in one color and
a decrease in demand in another color. State which color is which out to the side.
Give an example of what would cause the increase and what would cause the decrease.
List and briefly explain the 5 determinants of demand.
State the difference b/wn a change in demand and QD.
Due Tuesday, but not really…not taking up until we do Supply on the back.