Download Demand and Marginal Utility

Demand and Marginal Utility
Economics
Mr. Biddle
Demand and Marginal Utility
• Utility- The capacity
to be useful and
provide satisfaction
– Pertains to a product or
service
• The Utility of a good
or service may vary
from person to person
– Ex- Diet Mt. Dew
Demand and Marginal Utility
• Marginal Utility- The
extra usefulness or
satisfaction a person gets
from acquiring or using
one more unit of a product
• Buying a new one after
the first
• The more we use a
product we experience
diminishing marginal
Utility
Diminishing Marginal Utility
• The extra satisfaction we
get from using additional
quantities of product
begins to diminish or fade
• B/c of DMU people are
not willing to pay as much
money for a second, third,
or fourth product
• When you reach the point
where the marginal utility
is less than the price, you
stop buying it
Factors Affecting Demand
• Sometimes things
happen to change
peoples willingness
and ability to buy
• When this happens
you experience
Change in Quantity
Demanded
– Change in Price would
be an obvious one
The Income Effect
• The change in quantity demanded,
b/c of a change in price that alters
consumers’ real income
• Ex- If you went to the store
thinking you were going to buy 6
CD’s for $90, but when you got
there it only cost you $60. As a
result, you feel $30 richer and may
be willing to buy more. (or viceversa)
• The income you have after you
pay all expenses
The Substitute Effect
“Fly High Free Bird”
• The Change in quantity
demanded, because of the
change in the relative
price of the product (How
it relates to other products)
• This is when you buy
cheaper goods to replace
more expensive goods or
services demanded
• Ex- buying a CD instead
of going to a concert
Change in Demand
• Sometimes things happen
to make people willing to
buy different amounts of
a product at the same
price
–
–
–
–
Income
Tastes (fads)
Price of other goods
Number of consumers in
the market
– Change in expectations
Consumer Income
• When a person makes
more money they are
willing to spend more
• When they make less
they aren’t willing to
spend as much
Consumer Tastes (Preferences)
• Consumers don’t always
want the same things they
have wanted in the past
• This can be effected by
Advertising, fads, new
products, the season, and
so on
• Also, consumers can
simply get tired of a
product
The Price of Other Goods
• A change in the price of
related products can cause a
change in Demand
• Substitutes- a product that
can be used in the place of
another product
– Ex- Butter & Margarine
– If the price of one goes up,
the demand of the other
would go up as well
The Price of Other Goods
• Complements- products
that are used with other
products
• When one product
increases in demand so
does the other one
• Ex- Gillette razor
handles and blades
• Ex- Cake Mix and Icing
Change in Expectations
• Influences buying behavior
based on the way people
think about the future
• Bad weather reports makes
people stock up on food,
road salt, etc.
• If someone announced that
in a year there will be a new
way to listen to music on a
smaller disk, people might
stop buying CD/s now
Patriots fans wouldn’t have bought so much
memorabilia if they would have known this was
going to happen! 18-1*
* Spygate
Number of Consumers
• The bigger the market
is the more people
there is to buy
products, which means
a higher demand.
• Or vise versa
Reading Groups
2nd Period
Group 1
TJ Justus
Will Redden
Kendal Sandy
Lisanne Gregory
Group 2
Dominic Belew
Patrick McCain
Cheyenne Egbring
Gabby Baker
Jonah Smith
Group 4
Hunter Lea
Brooklyn Trent
Mason Taylor
Group 3
Samantha Glass
Dylan Reynolds Sabrina Sebastian
Austin Sikles
Jozi Steffen
Group 5
Tanner Mains
Cody Wilson
Chris Collins
Crystal Shepperd
Thomas Hutchinson
Lewis Farrell
Jordan Dennie
Reading Groups
4th Period
Group 1
Michael Webster
Madison Dotson
Group 3
Josh Brown
Montgomery Franx Tanya Edwards
Tara Fryman
Micheala Pittman
Group 2
Jeff Browning
Robert Hall
Hunter Cookendorfer
Britney Zachary
Tristen Knox
Jody Acton
Sarah Tackett
Group 4
McKenzie Florence
Catlyne Nuckels
Jay Heath
Kallie Bickel
Jacob Koettel
Group 5
Ronald Brock
Joe Johnson
Nelson Parks
Kayla Gabbard
Maraya Letner