Lp concept of demand sho ak

SHS Demo Teaching August 17, 2016

Student Handout Answer Key Activity 1

Name: _________________________________________ Section: __________ Date: ________

What is the Demand? Key

For each of the following scenarios (and everything else being equal), determine if the demand for the good or service would increase or decrease?

DEMAND (increase or decrease)

SCENARIO

INCREASEWhat would happen to the overall demand for tennis balls if the price of tennis rackets went down?

DECREASEWhat would happen to the overall demand for Macaroni and Cheese if the price were to go up P1.50 per box?

INCREASEYou get a raise at work. What would happen to the demand for going to the movies?

DECREASEA new Burger King opens down the road. What would happen to overall demand for McDonald’s?

DECREASECongress passes a law that increases income taxes by 5%. What would happen to the overall demand for tickets to Cinema?

INCREASEAngel Locsin is seen on the “red carpet” wearing a beautiful new Bench dress. What would happen to overall demand for Bench clothing?

INCREASEThere is a sale on donuts at Mister Donuts’. What would happen to overall demand for coffee at Mister Donuts’ Store’s?

DECREASEYou are shopping at Home Depot for a new grill and the salesperson lets it slip that there will be a sale beginning next week. What will happen to your demand for the grill?

DECREASEThe surgeon general has just come out with a warning that eating sausage causes cancer. What would happen to the overall demand for sausages?

INCREASEWhat would happen to overall demand for the Sony Play station if the price went down by 10 percent?



christopher d. balubayan [email protected]


The Law of Demand Key

DEMAND The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.

LAW OF DEMAND As the price of a good or service rises (or falls), the quantity of that good or service that people are willing and able to buy during a certain period of time falls (or rises)

PRICE QUANTITYP 32 350P 34 300P 36 250P 38 200P 40 150

All things being equal

If PRICE THEN QUANTITY P Q

IF PRICE THEN QUANTITY P Q

This is known as ____________________ relationship

RECALL: When prices RISE, quantity demanded DECREASES



Graphing Practice Key

Graph A – MSE Coin Purse


I N V E R S E


Price Quantity Demanded

350 20

300 30

250 40

200 50

150 60

100 70

Use Graph “A” to answer the following scenario. (Be sure to use proper labels as appropriate)

1. Graph the demand curve for MSE Coin Purse. Assume the price is set at P250.00.


P

350

300

250

200

150

100

20 30 40 6050 70

QTY

D


2. The price of MSE products from Manila went up 20%. As a result, the price of the new coin purse went up to P20.00. Show how that would be illustrated on the graph. What is the new demand? 30 purses.

3. Provide a possible explanation of the change in demand using the;

a. Substitution Effect: Because the price went up, people may just buy a different purse, reducing demand for the MSE coin purse.


a. Income Effect: Monica is a Grade 11 student and doesn’t have much money. The extra P20.00 makes it prohibitive for her to buy the coin purse.

Graph B – Flying V Oil per Litter

Price Quantity Demanded

65 25

60 35

55 45

50 55


P

65

60

55

50


45 65

40 75

Use Graph “B” to answer the following scenario. (Be sure to use proper labels as appropriate)

1. Graph the demand curve for the litters of oil in Flying V Company. Let’s assume that the going price for a litter of oil is P55.00.

2. The Belmonte - Cayetano Bill in Congress was passed and signed by President Duterte, adopting it into law. As Philippines will be less dependent of foreign oil, prices have gone down P5.00 a litter. What is the new demand for oil? 55 Litters.


a. Substitution Effect: As the price drops for oil, it becomes more appealing to buy Philippine oil than foreign oil.


a. Income Effect As the price has dropped for oil, people can afford to take vacations as fuel prices will be cheaper in relation to their income.



Shift in the Demand Curve Key


45

40

15 25 35 5545 65

QTY

D


What factors would cause a SHIFT in demand for coffee?

NORMALGOOD

INFERIORGOOD

NEUTRALGOOD

(with more income you

would buy more of the good)

(would buy less, you can now buy more of another

good)

(would buy same amount regardless

of increase or decrease in income)


Preferences (Taste) /Advertising

Income

Increases Decreases

Shift to the: RIGHT LEFT

You like More Don’t Like Anymore


Expectations




Analyzing Shifts in Demand Key

For each scenario:

1) Use the graph to illustrate the change in demand with either: a. a “shift” (a new D2 curve) or;b. a “slide” (an arrow along the curve)

2) Then provide the reason for the change in consumer demand using one of the following:a. Change in Priceb. Incomec. Preferences/Advertisingd. Expectationse. Price of Related Goods (Substitute or Compliment)


Shift to the: LEFT RIGHT

Price of Related Goods

SUBSTITUTES

COMPLEMENTS

Shift to the: LEFT RIGHT



Scenario 1

Local weather forecasters said that the coming Kadayawan festival in Davao will be sunny. Stores see increased sales for sunglasses, hats, and bottled water.

EXPLANATION

EXPECTATIONS (Sunny Forecast)

Scenario 2

The city government of Davao issues tax rebate checks to taxpayers, hoping they will increase spending, thus stimulating the economy. Sales of cars, electronics, and clothing go up.

EXPLANATION

INCOME (Tax Rebate)

Scenario 3

Globe Corporation announces it will introduce a new mega sim pack in two months. Sales of the older version of the sim pack drop by 25 percent.

EXPLANATION

EXPECTIATIONS (New Mega Sim pack coming out)

Scenario 4

The San Miguel Beer men are eliminated from the playoffs. Attendance for the weekend’s Azkals games goes up.

EXPLANATION

PRICE OF RELATED GOODSSubstitutes

(No Basketball game)

Scenario 5

When 7 Eleven cuts the price of hotdogs, people want to buy more hotdogs.

EXPLANATION

SlideP Down D Up


D1D2

D1

D1

D2

D2

D

D1D2


Scenario 6

A series of TV commercials in Davao shows people enjoying eating Durian cakes and candies, and orders for the said products increases.

EXPLANATION

PREFERENCES (Ad increases Desire)

Scenario 7

Sales of contact lens cleaner increases as more people wear contact lenses.

EXPLANATION

PRICE OF RELATED GOODS Compliment

(Contact Lenses)



DEMAND QUIZ Key

For each scenario:

1) Draw a simple curve to illustrate the change in demand;2) Then provide the reason for the change in demand

Scenario 1

You found a purse with P200 on the ground and turned it into the police. After a week, nobody claimed it so you got P200 and went to get kwek-kwek, which is a normal good. Graph the change for kwek-kwek.

EXPLANATION

Income Increased (More money to spend on a

Normal Good)


D2D1

D2D1

D2D1


Scenario 2

The Kadayawan Holiday sale ended last Sunday so less second hand clothes were bought today.

EXPLANATION

SlideP went Up

Scenario 3

You just bought a brand new Canon printer for your desk. What will happen to the demand for printer ink?

EXPLANATION

COMPLIMENTS (Ink is a Compliment to printer)

Scenario 4

A 3-Day Midnight sale at Unitop Supermarket is announced to begin next week. Less LED bulbs were desired this week.

EXPLANATION

EXPECTATIONS (Price will be dropping next week,

fewer wanted now)

Multiple Choice: Identify the choice that BEST complete the statement or answers the question.

1. Which is an example of the law of demand at work? a. The price of pizza goes up when the price of cheese goes up.b. Demand for pizza goes down when tacos become more popular.c. The price of pizza falls when demand for pizza falls.d. Demand for pizza rises when the price of pizza falls.

2. How does the substitution effect work when the price of an item drops?a. The item becomes less and less popular as price drops.b. The substitutes for the item also suffer a drop in price.c. Consumers buy the item as a substitute for other things.d. Consumers buy the item even if they do not particularly want it.

3. If prices rise but income stays the same, what is the effect on the quantity demanded?a. Quantity demanded increases b. More goods are boughtc. Fewer goods are bought d. Demand stays the same

4. How can expectations about the future change consumer behavior?a. Immediate demand for a good will drop if the price is expected to stay the sameb. Immediate demand for a good will rise if the good is expected to be plentiful. c. Immediate demand for a good will rise if its price is expected to rise.d. Immediate demand for a good will drop if there are no substitutes available.

5. Which of the following will happen if the price of butter goes up?


D2D1

D

D2D1


a. The demand for butter increases.b. The demand for margarine increases.c. The demand curve for butter moves (slides) to the right.d. The demand curve for margarine moves (slides) to the left.

6. What causes a shift in the demand curve? a. A decrease in price. b. A change in an area other than price.c. An increase in price. d. A change in price and availability.

7. John gets a raise and decides to start buying enriched pasta instead of cheaper instant noodles For John, instant noodles are examples of,

a. Inelasticity. b. A market demand.c. Complements d. Inferior goods.

8. During a six-month period, the price of a popular shoe raises from P28 to P39 a pair. During this same period, demand for this shoe will probably

a. Increase b. Remain constantc. Decrease d. Disappear

9. The substitution effect and the income effect describe a. How income changes when buyers change jobs. b. Choices that producers make to improve goods. c. Factors that influence consumer buying choices. d. Market changes that affect production of goods.

10. In July, an automobile company announces that next year’s models, with more features, will start to arrive in September or October. What is likely to happen to demand for this year’s model in August?

a. Demand will rise in anticipation of higher prices. b. Demand will fall in anticipation of lower prices. c. Demand will go to zero because everyone will want the new model. d. Demand will stay the same and price will stay the same.


Education

Lp concept of demand sho ak