Download Demand - Duplin County Schools

21.1 Demand and 21.2
Factors Affecting Demand
An Introduction to Demand
 Demand is the desire,
willingness, and ability to
buy a good or service;
consumers must want
the good, be willing to
pay, and have the
resources to buy it
 A demand schedule is a
table that lists quantities
of a product or service
someone is willing to buy
over a range of prices
An Introduction to Demand
 A demand curve is a graph that shows the
amount of a product that would be bought at all
possible prices
 Prices are on the vertical axis and quantity is
shown on the horizontal axis; each point on the
curve shows units sold at each price
An Introduction to Demand
 Demand curves usually slope downward because
people normally buy less of a product if the price
is high and more if the price is low
 According to the law of demand, quantity
demanded and price move in opposite directions
Market Demand
 Companies are interested in market demand- the
total demand of all consumers for their product
or service, not individual demand
 Utility is the pleasure, usefulness, or satisfaction
we get from using a product; satisfaction usually
changes as we consume more of a product
 Ex: The first piece of pizza is AMAZING, the
tenth piece is just okay.
Market Demand
 Marginal utility is the additional satisfaction or
use that is derived from each new unit acquired
 Diminishing marginal utility is the principle that
our additional satisfaction, or marginal utility
tends to go down as more units are consumed
Market Demand
 If extra benefits (marginal
utility) gained are greater
than the marginal costs
(money paid) we make the
purchase; otherwise we
keep our money
 When the demand curve
slopes downward it tells
us we would be willing to
pay the highest price for
the first unit we consume,
a slightly lower price for
the next, an even lower
price for the third, and so
on
Changes in Demand
 When demand goes
down people are willing
to buy fewer items at all
possible prices; in this
case demand shifts to the
left LOWERS
 When demand goes up,
people are willing to buy
more of the same item at
any given price; this
pushes the demand curve
to the right RAISES
Changes in Demand
1.
2.
3.
4.
What determines demand?
Changes in Population= demand is related to the
number of consumers in an area, more people
means higher demand
Changes in Income= demand changes when
consumers’ incomes change; when people have
more money they usually spend more
Changes in Tastes= changing tastes and
popularity of a product can affect demand
Changes in Expectations= refers to the way
people think about the future; they can force
demand higher or lower
Changes in Demand
 Demand is also affected by the prices of related
goods; there are two types of related goods
substitutes and complements
 Substitutes are items consumers can use in place of
one another; a change in price of one causes
demand for the other to move in the same direction
Coffee and Tea are SUBSTITUTES; if the price of coffee goes UP, demand for tea goes UP
Changes in Demand
 Complements are products that can be used
together; the demand for one moves in the
opposite direction as the price of the other
 The only factor that can directly cause a
change in the quantity of a good is a change in
its price; if the price of coffee goes up demand
will fall
Computers and Software are COMPLEMENTS; if the price for computers goes UP, demand for
software goes DOWN
Elasticity of Demand
 The law of demand states that price and quantity
demanded move in opposite directions; if price
goes up demand goes down
 Demand elasticity is the extent to which a change
in price causes a change in quantity demanded
Price goes UP
Demand goes DOWN
Price goes DOWN
Demand goes UP
Elasticity of Demand
 If demand is elastic it means
a change in price causes a
large percentage of change
in quantity demanded;
demand can be elastic if
there are attractive
substitutes, if the item is
expensive, or the purchase
can be postponed
 If demand is inelastic it
means a change in price has
little effect on the quantity
demanded; demand can be
inelastic if there are few or
no substitutes
Elasticity of Demand
 Demand for medicine and food is inelastic
because these are necessities which are goods
needed in order to survive; demand for luxuries
is elastic because buyers are more able to cut
back on quantity demanded