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WARM-UP
• What is demand?
• What products or things are most “indemand” to you and why? List 5.
Chapter 4:
Demand
Section 1:
What is Demand?
Main Idea:
Demand is a willingness to buy a product
at a particular price.
Desire
• People sometimes think of demand as the
desire to have or to own a certain product
• In this sense, anyone who would like to own a
$10,000 HD 3D TV could be said to “demand” one
• Desire is not enough to be counted in the
marketplace
• Demand—the desire, ability, and willingness to
buy a product
• Microeconomics – area of economics that deal
with behavior and decision making by small units,
such as individuals and firms.
• Microeconomic concepts help explain:
1.How prices are determined
2.How individual economic decisions are made
The Law of Demand
• The Law of Demand
states that the quantity
demanded of a good or
service varies inversely
with its price.
• When price goes up, the
quantity demanded goes
down
• When price goes down,
the quantity demanded
goes up
The Graph Background
• X Axis: Always Quantity
• Y Axis: Always Price
PRICE
Y AXIS
QUANTITY X AXIS
Figure 4.1
The Demand for Compact Discs
• Demand schedule:
listing showing the
quantity demanded at all
possible prices that might
prevail in the market at a
given time
• Demand curve: graph
showing the quantity
demanded at each and every
possible price that might
prevail in the market at any
given time
• A market demand curve illustrates how
the quantity that all interested persons (the
market) will demand varies depending on
the price of a good or service.
Demand and Marginal Utility
• Marginal utility is the extra usefulness or
satisfaction a person receives from getting or
using one more unit of a product
• Diminishing marginal utility: the satisfaction we
gain from buying a product lessens as we buy
more of the same product.