Download A Lesson on Demand

A Lesson
on
Demand
What is Demand?

Willing and able to purchase a product at a
particular price
 How many of you would like a Porsche [or
like vehicle]?
 How many of you are able?
 What’s the difference between willing and
able?
 Idea of time and place – at this time, you may
be willing to buy a Porsche, but are not able,
therefore you do not have a “DEMAND” for a
Porsche
Example: Demand for lolipops
Totals
10
20
30
40
50
Demand Schedule
 A table
that lists at various prices, the
number of items demanded
Demand Curve – the graphic representation of
demand
Graphing a Demand Schedule:
1. The lower left quadrant is “0”
2. The vertical axis is price
3. The horizontal axis is quantity
Graph the
numbers from
the Lollipop
Demand
Schedule
Law of Demand
 As
price falls, the quantity demanded
increases. As the price rises, the
quantity demanded decreases
 P QD
Price per gallon Bottles per week
of water
$
Jo
Pat
.74
90
50
.50
130
70
.36
180
100
.28
290
130
Demand Curve for Bottled Water
Change in Quantity
Demanded vs. Change in
Demand
 Change
in Quantity Demanded:
 Caused
by change in own price of good
 Movement along the curve
 Change
in Demand:
 Caused
by Change in determinant of
demand
 Shift to new demand curve
Demand Determinants
 Income
 Normal
Good: a good for which demand
increases as consumer incomes rise (milk)
 Inferior Good: A good for which demand
decreases as consumer incomes rise
(ground chuck, bus rides)
 As income rises consumers tend to switch
from consuming these inferior goods to
consuming normal goods (ex. steak,
car/plane)
Determinants con’t
 Preference/Taste
 Likes
and dislikes in consumption
 Consumer
Expectations
 Change
in future price of goods
 Change in future income
 Population
 As
Change
the number of consumers in a market
changes the demand will change
Determinants con’t
 Prices
of Related Goods
 Substitutes:
Goods that are related in such
a way that an increase in the price of one
leads to an increase in the demand for the
other [goods that can be consumed in
place of one another] (Pepsi and Coke)
 Compliments: Goods that are related in
such a way that an increase in the price of
one leads to a decrease in the demand for
the other [goods that are normally
consumed together] (hamburgers and
french fries)