Download Quantity Demanded

 Grab your Freyonomy and a Bellwork
Agenda
 Bellwork: Freyonomy
 Demand PowerPoint Notes
 Demand Reading Notes (pgs. 2-5 of packet)
 Exit Ticket: Demand Application Problems
 IP- Finish Reading Notes if needed
OUTCOME
 Students will identify the relationship between
price and demand
Freyonomy Raffle
 Raffle tickets are $50
 Max of 10 tickets
 Write your name on each ticket and fold
it in half
 You can only win a prize once
Freyonomy Events
 It’s your birthday! +$200 to your account
 Nail in your tire -$200
 Nothing! 
 You need work done on your car’s transmission $1500
 Found a $50 bill on the ground
 You have 5 cavities. Brush more!!! -$300
 Your furnace is broken -$900
 You have a sinus infection-$200
 You were mugged.  -$201, +$1 from the tooth fairy for your missing teeth
 You shattered your cellphone . You buy a used phone for $150.
 Your granny sent you a $10 bill. Lucky you!
 Car accident $1000
 Need new tires $600
 Speeding ticket $200
 Nothing! 
 Ticket for running a red light $200
When purchasing things to buy
 You evaluate your…
willingness to buy
ability to buy
Bazbeaux’s Pizza
• $15
– Are you willing?
– Are you able?
– Do you have a demand?
Private Jet
• $8,000,000
– Are you willing?
– Are you able?
– Do you have a demand?
Demand –
Consumer Behavior
Ms. Frey
What is Demand?
 Demand- the willingness to buy a good or service
and the ability to pay for it.
 Law of Demand-
As prices
As prices
quantity demanded goes up
quantity demanded goes down
Challenge Question #1
 You have $10 that you want to spend buying
music on iTunes.
 What quantity would you demand if the price was $1 a
song?
 What quantity would you demand if the price was $3 a
song?
 What caused the quantity of songs of that you
demanded to change?
Cheryl’s DVD Demand Schedule
 Demand schedule- a table that
shows how much of a good or
service an individual consumer
is willing and able to purchase at
each price in a market.
 As the price falls, the number of
DVDs Cheryl will buy rises.
 So quantity demanded and
price have an inverse, or
opposite relationship.
Price
per DVD ($)
Quantity
Demanded
30
0
25
1
20
2
15
3
10
4
5
7
Demand Curve
 Demand curve- a graph that displays the
data from an individual demand
schedule
(How much of a G/S someone
will purchase at various prices)
$
 How many DVDs will Cheryl buy when
the price is $10?
$
$
$
$
Quantity of DVD’s Demanded
Rafael’s DVD Market Demand Schedule
 Market demand schedule- shows how
much all consumers are willing and
able to buy at each price in a market.
 How did Rafael create a market demand
schedule?


Surveyed customers
Reviewed sales figures to see how
many DVDs he sold at each price
Price
per DVD ($)
Quantity
Demanded
30
50
25
75
20
100
15
125
10
175
5
300
Market Demand Curve
 Market demand curve- shows
the data found in the market
demand schedule.
Challenge Question #2
 Cheryl was unwilling to buy any DVDs at $30. Montclair Video
Mart can sell 50 DVDs at that price. How do you explain the
difference between the market curve and Cheryl’s individual
curve?
• Different ability- Cheryl makes less money than those in the market
• Different willingness- members of the market might be DVD
collectors while Cheryl is not
Law of Demand
 As prices
… quantity goes .
As prices … quantity demanded .
 Inverse relationship between price and quantity.
 Independent variable (Price)  dependent variable (Quantity)
 Called the “Price Effect” – Price caused consumer
behavior to change…we buy more or less because of the
change in price
Challenge Question #3
 Considering the law of demand, when the price of
concert tickets increase, what will happen to the
quantity that is demanded?
Read and Take Notes on
Chapter 4.2
Notes pages 2-5
Textbook pages. 106-113
When you are finished
 Complete the “application questions” on the back of
your bellwork
Exit Ticket
 Grab your Freyonomy and a bellwork
Agenda
 Bellwork
 Review Demand Notes
 Demand Interactive
 Demand Practice Problems
 Elasticity Notes
 IP- Demand Study Guide
(mastery quiz next class!!!)
OUTCOMES
 Students will contrast changes in demand from changes in quantity
demanded
 Students will determine demand elasticity in response to
changes in price
Notes Review
More about Demand Curves
 Law of diminishing marginal utility Margin= use of one more unit
 the benefit from using each additional unit
tends to decline as each is used.
 Because of the law of diminishing marginal
utility, once a consumer buys his first glass of
lemonade, he is likely to only buy a second if
the price is decreased/increased (circle one)
Income and Substitution Effect
 Income- change in price of product will make you feel
“richer” and more likely to buy more of that product
 Substitution Effect- consumers react to a change in
price through buying a substitute
 Challenge Question#1: Malik goes to the mall to buy a $40 pair of jeans
and discovers that they are on sale for $25. If Malik buys two pairs, is this an
example of the income effect or the substitution effect?
Change in Quantity Demanded
 Change in the amount of product demanded because of a change in price
 Change in quantity demanded shown by movement along the curve
CHALLENGE QUESTIONS 2-4
#2-4: Price of chicken sandwiches
increased, what happened to the
quantity of sandwiches demanded?
 Decreased
#5: What caused the quantity of
sandwiches demanded to change?
 Price
#6: What description illustrates the
change in quantity demanded?
 Movement along the curve
Change in Demand
 Change in demand occurs when
 change in marketplace prompts consumers to buy different
amounts of a good or service at each and every price.
 Change in demand shown by shift of demand curve
CHALLENGE QUESTION!!
Figure 4.8 Does this shift to
the left indicate in increase or
decrease of demand? (circle
one)
Figure 4.8 Does this shift to
the right indicate in increase
or decrease of demand? (circle
one)
Demand Determinants
 6 Factors that cause a shift- We’ll get back to this!
Change in Demand: CQ #7-15
Chick-fil-a consumers offended by anti-gay
marriage comments
#7-12-:What happened to demand at each price
($1, $2, and $3)?
 Decreased- curve shifted left
#13: Which of the 6 demand determinants
explains why demand shifted?
 Consumer tastes
#14: Which description illustrates this change in
demand?
 Scenario caused a SHIFT
#15: Because the curve shifted to the left, what
happened to the overall demanded for chicken
sandwiches?
 It decreased (less is left!!!)
Demand Interactive
Changes in Demand
Income, Market Size, Consumer Tastes, Consumer Expectations, Substitute
Goods, Complimentary Goods
 Change in demand of hotel rooms
in Florida during the school year
Market Size
 Demand Decrease 
 Change in demand of silly bands
because WWFD (What Would Frey
Do) bracelets have become more
popular
 Consumer Tastes
 Demand Decrease 
 The price for peanut butter falls
which results in a change of demand
for jelly
 Complements
 Demand Increase 

 Change in demand for t-shirts at
Old Navy the week before Black
Friday
Consumer Expectations
 Demand Decrease 
 Matt gets a raise at work so he
decides to buy more comic books
than before
 Income
 Demand Increase 
 The price of Advil rises so people
begin to buy the generic brands of
ibuprofen.
 Substitute Goods
 Demand Increase 

D
$10
$8
$6
$4
$2
10 20 30 40 50 60 70 80 90
Less is left!!!!
D
$10
$8
$6
$4
$2
10 20 30 40 50 60 70 80 90
Right is more!
Start Pay Period 3 on the next set of blocks
 Turn in Tokens
Complete questions 4-12
Complete questions 13-16
Chapter 4.3
Critical Thinking: Challenge Question 1-2
1. Does quantity demanded always decrease if price rises?
List a goods or services that you think would remain in
demand even if the price rose sharply.
2. Why does demand for these items change very little?
Key Concepts
 Buying habits affected by type of product and importance to
consumer
• Elasticity of demand- measure of how responsive
consumers are to price changes
 Elastic- quantity demanded changes greatly as price changes
 Ex: Candy bars
 Inelastic- quantity demanded changes little as price changes
 Ex. Medicine
Firms must know the Price Elasticity of
Demand of their product!
What the graphs look like
 Elastic Demand
 Movie Tickets
 Inelastic Demand
 Dental Fillings
 Curve appears horizontal
 Curve appears vertical
$500
$25
$8
$20
100
400
800
100
400
800
What determines elasticity?
1.
Substitute goods or services


If there is a substitute demand will be elastic
If there is no substitute demand will be inelastic
2. Proportion of Income


Products that cost a higher percentage of our income tend
to be elastic (ex. Airfare increases from $200 to $600)
Products that cost a lower percentage of our income tend to
be inelastic (ex. pens and pencils)
3. Necessity or Luxury


Necessities are inelastic (x-rays)
Luxuries are elastic (milkshakes)
Challenge Questions 3-8
3. Is demand for pizza elastic or inelastic?
 Elastic- luxury
4. Is demand for car seats elastic or inelastic?
 Inelastic- necessity
5. Is demand for a pay per view, which has a monopoly on
highly popular boxing events elastic or inelastic?
 Inelastic- lack of substitute
6. If the price of chewing gum doubled, would the demand
be elastic or inelastic?
 Inelastic- small proportion of income
7. Draw an elastic demand curve
8. Draw an inelastic demand curve
Total Revenue Test
•
Total revenue- amount of money company gets for selling its
products

Formula: Total Revenue= P (price) x Q (quantity sold)
 Total revenue test- shows total revenue from item at
various prices
 If total revenue rises after price drops, demand is elastic
 At $1.00 x 10 snickers demanded= $10 in TR
 At $.50 x 30 snickers demanded= $15 in TR
 TR increased, so demand is elastic
 If total revenue decreases after price drops, demand is
inelastic



At $1.00 x 10 Band-Aids demanded= $10 in TR
At $.50 x 12 Band-Aids demanded= $6 in TR
TR decreased, so demand is inelastic
Challenge Question #9
Maria used to sell 60 cupcakes for $3. When she changed the
price to $2, she sold 100 cupcakes. Using the total revenue test,
determine whether her cupcakes are elastic or inelastic.
 P 1 x Q1= TR1
 P2 x Q2= TR2


If total revenue rises after price drops, demand is elastic
 Cheaper price influenced demand
If total revenue decreases after price drops, demand is
inelastic
 Cheaper price did not increase demand
 $3 x 60= 180
 $2 x 100= 200
Challenge Question #10
 OfficeMax recently changed the price of their white
copy paper. Previously, when copy paper was $5.00 a
pack 100 units were sold. When the price decreased to
$4.00 a pack, 110 units were sold. Using the total
revenue test, determine the elasticity of copy paper.
 P 1 x Q1= TR1
 P2 x Q2= TR2
$5.00 x 100= $500
$4.00 x 110= $440
 TR decreased after price drop
Extra Review Questions
 If time permits…
1. Which graph reflects what would
happen to demand if Hersey
bars became more expensive?
2.
Which graph reflects what
would happen to demand for
N’Sync songs after a reunion
caused them to become more
popular?
3. Which graph reflects what would
happen to demand for Dominos
if Pizza Hut became cheaper?
4. Which graph reflects what would
happen to demand for Corvettes
if they became cheaper?
5. Which graph reflects what would
happen to demand for ski
equipment in Salt Lake City in
the Summer?
Review Questions