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 Think of products you buy on a regular
 Who influences the prices and
availability of those products?
 How do they influence the prices and
Chapter 4.1, 4.2, 4.3
Why does it matter?
 The concept of demand is demonstrated every time you buy
 Demand is linked to the very human desire to meet wants.
What is Demand?
 Demand--the desire for an item and the ability to pay for it
 Law of demand (Explains consumer behavior as well as
economic concepts)
 when price of good or service goes up, quantity demand goes
 when price of good or service goes down, quantity demand
goes up
Demand Schedules
 Identifies preferences for pricing to get the most product or
service for your $
 Demand schedule--a table that summarizes one consumer's
 lists how much of an item an individual will buy at each price
Demand Curves
 Demand curves graphically show information found on
demand schedules
 Demand curve--a graph that shows amount of an item a
consumer will buy at each price
Changes in Quantity Demand
 Change in quantity demanded
 change in amount consumers buy because of change in price
 each change shown by new point on demand curve
 does not shift the demand curve itself
 Brainstorm examples of times when
something other than price affected your
decision to buy.
Change in Demand
 Change in demand is caused by a change in the marketplace
 prompts people to buy different amounts at every price
 also called shift in demand
 Six factors can cause a change in demand
 Income
 Market size
 Consumer taste
 Consumer expectations
 Substitutes
 Complements
Six Factors of Demand
 Income- persons’ ability to buy (normal and inferior goods)
 Market size- population size (rise-rise, drop-drop)
 Consumer taste- tastes change to drive product popularity
 Consumer expectations- expectations about future pricing
affect behavior
 Substitutes- products used in place of others
 Complements- goods that are used together (if one price
changes the demand for both products changes)
Elasticity of Demand
 Elasticity of demand- measure of how responsive consumers
are to price changes
 Elastic - quantity demanded changes greatly as price changes
 Inelastic - quantity demanded changes little as price changes
What determines elasticity?
 Three factors affect elasticity of demand
 availability of substitutes
 proportion of income spent on good or service
 whether product is a necessity or luxury
Why is elasticity important?
 Knowing elasticity of demand tells sellers whether to cut
 if demand is elastic, price cuts might increase earnings
 if demand is inelastic, price cuts will not increase earnings