Download Demand Lecture

Demand
I) Examines
choices made by
consumers
a) Must have the ability to
purchase
b) Must be willing to make the
purchase
c) Must be over a given period of
time
II) Ways of reading demand
a) Demand Schedule
Cold Stone Ice Cream-One Week
Price
12.00
8.00
4.00
2.00
1.00
.50
.20
• 1) A chart with the price in
one-column and quantity
Quantity
consumed on the other.
0
• 2) Is easy to index and
1
locate information
2
4
8
12
16
b) Demand Curve
P
12
R
8
I
4
C
2
E
1
• 1) A graph with price
on one axis & quantity
consumed on the other
• 2) Can extrapolate to
estimate unknowns
1
4
8
Quantity Consumed
12
16
III) Characteristics of Demand
• A) The law of
demand/ As price
drops, demand
will increase
b) Marginal Utility
• 1) The increase in
satisfaction from an
increase of a unit
consumed
• 2) This diminishes
over time
c) Income effect
• The higher the
percentage of your
income the lower
the demand
• Less Disposable
Income
d) Substitution effect
• As price goes
up people
will find
cheaper
alternatives