Download Demand

Objectives

 Explain the concept of demand
 Analyze a demand curve
 Identify factors that affect demand
 Describe what is meant by price elasticity of demand
What is Demand

 Demand
 The willingness and ability to buy a given good or
service
 The relationship between the price and quantity
demanded for a good or service
 Quantity Demanded – the amount of goods and
services purchased at a given price
Law of Demand

 Law of Demand – there is an inverse relationship
between the price of a good and the quantity buyers
purchase
 Price and quantity demanded move in opposite
directions
 When price goes up the quantity demanded
decreases
 When price goes down the quantity demanded
increases
Demand Schedule

 Demand schedule is a
table that lists the
quantity of a good or
service consumers
purchase at various
possible prices
Price
Quantity Demanded
$5
25
$7.50
20
$10
15
$12.50
10
$15
5
Demand Curve

 The same information can also be illustrated as a
demand curve, in which the quantities demanded
are placed on a graph with a line connecting all of
the points on the graph
 This allows you to move along the line and find the
quantity demanded by buyers at possible selling
prices
Demand Curve

Demand Shifters

 Factors that will cause supply to move the curve’s
position in either direction – left or right
 Population
 People moving in or out of a market
 Consumer tastes
 Price expectations
 Consumers may be waiting for the product to go on sale
Demand Shifters

 Factors that will cause supply to move the curve’s
position in either direction – left or right
 Income
 People willing to spend more as income increases
 Change in price of substitute goods
 If price of a substitute good (example – different brand),
consumer may buy the substitute.
 Also applies to goods that are the same in some way and
one may be used in place of the other. A price change in
one affects the demand for the other
Demand Shifters

 Factors that will cause supply to move the curve’s
position in either direction – left or right
 Change in price of complementary goods
 Goods that are used together
 Demand moves in the same direction
Difference Between Changes in Quantity
Demanded and Changes in Demand

 Change in quantity demanded results solely from a
change in price
 It is a movement between points along a
stationary demand curve
 This change assume that all other demand shifter
factors remain the same (no change population,
consumer tastes, etc)
Difference Between Changes in Quantity
Demanded and Changes in Demand

Difference Between Changes in Quantity
Demanded and Changes in Demand

 Change in demand
 An increase (rightward shift) or a decrease
(leftward shift) of the demand curve.
 Results from the demand shifters (previously
discussed)
Difference Between Changes in Quantity
Demanded and Changes in Demand

Price Elasticity of Demand

 Price Elasticity of Demand – Difference in quantity
demanded compared to difference in price
 Elastic demand – given change in price causes a
relatively larger change in quantity demanded
 Inelastic demand – given change in prices causes a
relatively smaller change in quantity demanded
Elastic Demand

Inelastic Demand

Questions?

Demand is the __________ and __________ to buy a
given good or service.
A.
B.
C.
D.
passion . . . desire
willingness . . . ability
need . . . opportunity
motivation . . . determination
Questions?

Demand is the __________ and __________ to buy a
given good or service.
A.
B.
C.
D.
passion . . . desire
willingness . . . ability
need . . . opportunity
motivation . . . determination
Questions?

The law of demand states that price and quantity
demanded move in __________ directions.
A.
B.
C.
D.
Similar
Opposite
Parallel
Identical
Questions?

The law of demand states that price and quantity
demanded move in __________ directions.
A.
B.
C.
D.
Similar
Opposite
Parallel
Identical
Questions?

A demand __________ is a graphic representation of
the law of demand.
A.
B.
C.
D.
Schedule
Curve
Projection
Model
Questions?

A demand __________ is a graphic representation of
the law of demand.
A.
B.
C.
D.
Schedule
Curve
Projection
Model
Questions?

If consumers expect the price of a good to increase in
the near future then immediate demand for that good
will be __________.
A.
B.
C.
D.
Stopped
Increased
Decreased
Unchanged
Questions?

If consumers expect the price of a good to increase in
the near future then immediate demand for that good
will be __________.
A.
B.
C.
D.
Stopped
Increased
Decreased
Unchanged
Questions?

If there is an increase in __________ then there will
be an increase in the demand for most goods.
A.
B.
C.
D.
Consumer price
Production cost
Quantity supply
Consumer income
Questions?

If there is an increase in __________ then there will
be an increase in the demand for most goods.
A.
B.
C.
D.
Consumer price
Production cost
Quantity supply
Consumer income
Questions?

An economic downturn can cause the demand curve to
__________.
A.
B.
C.
D.
Shift to the left
Shift to the right
Remain unchanged
Be a vertical line
Questions?

An economic downturn can cause the demand curve to
__________.
A.
B.
C.
D.
Shift to the left
Shift to the right
Remain unchanged
Be a vertical line
Questions?

All of the following are examples of complementary
goods EXCEPT:
A.
B.
C.
D.
cars and tires
Pepsi and Coke
hot dogs and buns
peanut butter and jelly
Questions?

All of the following are examples of complementary
goods EXCEPT:
A.
B.
C.
D.
cars and tires
Pepsi and Coke
hot dogs and buns
peanut butter and jelly
Questions?

All of the following are examples of substitute goods
EXCEPT:
A.
B.
C.
D.
butter and margarine
car and motorcycle
oil and natural gas
toothpaste and toothbrush
Questions?

All of the following are examples of substitute goods
EXCEPT:
A.
B.
C.
D.
butter and margarine
car and motorcycle
oil and natural gas
toothpaste and toothbrush
Questions?

If a change in price causes a relatively small change in
the quantity demanded then the demand is __________.
A.
B.
C.
D.
Elastic
Shifted
Inelastic
Controlled
Questions?

If a change in price causes a relatively small change in
the quantity demanded then the demand is __________.
A.
B.
C.
D.
Elastic
Shifted
Inelastic
Controlled
Questions?

If a change in price causes a relatively large change in
the quantity demanded then the demand is __________.
A.
B.
C.
D.
Elastic
Fixed
Inelastic
Intolerant
Questions?

If a change in price causes a relatively large change in
the quantity demanded then the demand is __________.
A.
B.
C.
D.
Elastic
Fixed
Inelastic
Intolerant