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Intro to Demand
Why are tickets to the Super Bowl more expensive than tickets to a Chavez game?
Popular Fads Throughout History
DemandVOCABULARY:Demand: The desire to own something
and the ability to pay for it.
Law of Demand: As the price of a good increases, quantity demanded decreases (and vice versa) (DO NOT SAY DEMAND DECREASES)
In other words: when price goes up, we buy less…when price goes down, we buy more
Two Behavior Patterns That Contribute to the Law of Demand
1. The Substitution Effect.occurs when consumers react to an increase in a good’s price by consuming less of that good… and more of other goods that satisfy the same basic need.
OR
Substitutes
Substitutes: Goods that are used in place of one another.When the price of one goes up, the demand for the other goes up (and Vice Versa)
Compliments
Compliments: Goods that are bought and used together.When the price of one goes up, the demand for the other goes down.
Assessment Question
The Law of Demand says that as price goes up, quantity demanded ____ _____.
Assessment Question
IF I’m planning a barbecue and the price of hot dogs doubles, my decision to buy hamburgers instead is an illustration of the ________ effect.
Vocabulary
Individual Demand Schedule: a table that lists the quantity of a good that a person will purchase at each price in the market.
Market Demand Schedule: a table that lists the quantity of a good all consumers in a market will buy at each different price.
Why is the Market Demand Schedule important?
It is used by CEO’s and company executives to help them to determine how they should price their product.
Review From Yesterday
1. If the price of tortilla chips increases, what will happen to the demand for salsa?
2. If the price of Coke increases, what will happen to the demand for Pepsi?
3. If two goods are substitutes, what will happen to the demand for Product A if the price of Product B decreases?
4. If two goods are complements, what will happen to the demand for Product A if the price of Product B decreases?
5. What is the Law of Demand?
Bellwork:
In your notebook, write down the
Individual and Market Demand Schedules on
the board to your right.
Turning Individual Demand Schedules into Market Demand Schedules:
Using the Demand Schedule to Create a Demand Curve
What is a demand curve?
It’s just a graphical representation of a demand schedule!
Demand Curves:
Horizontal axis shows quantity
Vertical axis shows price
Let’s talk about horizontal, vertical, and quantity.
-COPY DEMAND CURVE ON BOARD
Change in Quantity Demanded
Vocab: Change in Quantity Demanded: a
movement along the demand curve caused by a change in ONLY price.
Questions:
1. What is the change in quantity demanded if price changes from $2.50 to $2.00?
2. What is the change in quantity demanded if price changes from $2.00 to $1.00?
3. What is the change in quantity demanded if price changes from $0.50 to $2.00?
Change in Demand
Vocab: Change in
Demand: A shift in the demand curve due to factors other than price. Basically it shows that demand has changed at all different price levels.
Change in Demand
Factors that cause a Change in Demand (Shift of the Demand Curve):
1. Income (if we make more $, we will
demand more of a good at any price. The opposite is also true!).2. Consumer expectations
(If we expect prices to rise in the future, we’ll be more likely to spend more $ now. If we expect a sale, we will be less likely to spend more now).
Change in Demand
3. Consumer tastes and advertising (Think about it…why do companies use celebrities to promote their products?).
4. Population (If population goes up…so does
demand. Think baby boomer gen.).5. Prices of related goods (substitutes and compliments). (If the price of tortilla chips increases, what will happen to the demand for salsa?).
What Does a Shift Look Like?
Increase in Demand is a right shift:
What Does a Shift Look Like?
Decrease in Demand is a Left Shift.
