Download DEMAND Objective – Describe the determinants of demand through

12/6 Warm-Up
1. Which economic system includes
bartering?
2. In which economic system is the
entrepreneur given the incentive to start
new businesses and earn profits?
DEMAND
p. 233
Objective – Describe the
determinants of demand
through notes and practice
examples.
REVIEW…
• What role does the consumer play in a
market economy?
• Define Consumer Sovereignty ….
• The ___________________ decides
what goods and services are
available in the market by what they
are willing to ____________.
• Define Self Interest Motive…
• Consumers want to buy things at
________ prices.
REVIEW…
• What role does the consumer play in a
market economy?
• Define Consumer Sovereignty ….
• The CONSUMER decides what goods
and services are available in the
market by what they are willing to
BUY.
• Define Self Interest Motive…
• Consumers want to buy things at
LOW prices.
• Discuss the economy spectrum…
• _________________________________________________
DEMAND – think like a consumer!
• Demand: the desire to own
something and the ability to
pay for it
DEMAND – think like a consumer!
• Demand: the desire to own
something and the ability to pay
for it
• The Law of Demand states that as
prices decrease people are
willing to buy more. As price
increases people are willing to
buy less
•P
D
P
D
(inverse relationship)
Graph the Following Demand Curve Using the
Demand Schedule Below
Price
Quantity
5.00
100
10.00
70
15.00
50
• Demand Curve:
Graphic
representation
of the demand
schedule.
• y-axis = price
20.00
30
25.00
20
35.00
10
• x-axis =
quantity
demanded
50
45
40
Price $
35
30
25
20
15
10
5
0
10
20
30
40
50
60
70
Quantity of DVDs Demanded
80
90
100
Demand Curve
Price
Qty
5.00
100
10.00
70
15.00
50
20.00
30
25.00
20
35.00
10
Price
D
Quantity
Demand
• Market Demand Curves
• Show how people’s buying habits
will change at certain prices
ONLY
• Show a specific market only
• Assume no other factors change
(just price)
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
• Consumer’s income changes: As
income increases, demand
increases.
The money you
have, the more
demand you will
have for goods and
services.
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
• Consumer Expectations: if shortage
is expected, demand increases
As consumers
expect the
availability of goods
to decline, they will
have a higher
demand for these
goods.
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
• Population Size: Population
increases, demand increases
When there are more
people there will be a
higher demand for
goods and services.
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
• Consumer Taste: If a good becomes
popular, demand increases
As these items
became popular,
the demand
increased.
WHY WOULD THERE BE A SHIFT
(change) IN DEMAND?
• Change in Price of Related Goods:
• Complements: goods bought together
(ex. PB&J)
• Comp. good price increases, the good’s
demand decreases
(inverse relationship)
• Substitutes: goods used in place of one
another (ex. skis and snowboards)
• If a substitute price increases, the good’s
demand increases
(direct relationship)
Elasticity of Demand
• ELASTICITY of DEMAND: How much the
quantity demanded will change if the
price rises or falls.
• ELASTIC DEMAND: demand that is very
sensitive to a change in price
• goods that one might stop buying or cut
back on as price increased (SUVs,
Luxury items)**on a graph this demand
curve will be FLAT
Elasticity of Demand
• INELASTIC DEMAND: demand that is not very
sensitive to a change in price
• goods that you would buy at any price; there are
few if any substitutes for these goods.
• (milk, gas, prescription drugs) **on a graph this
demand curve would be very steep.
Practice Graphing Demand p. 234
Graphing Demand
•
At a price of $1.00, the quantity demanded
of slices of pizza is _____10_______ .
•
At a price of $3.50, the quantity demanded
of slices of pizza is __2___________ .
•
Is this a shift in the demand curve or a
movement along the demand curve?
Movement along the curve – only price is
changing in the first graph
Graphing Demand
4.00
Price $
3.50
3.00
2.50
2.00
1.50
Shift
Shift to the
left – demand
is decreasing
1.00
.50
0
1
2
3
4
D1
D2
5
6
7
8
Quantity of Pizza Demanded
9
10
Graphing Demand
a. Is the change in demand, due to
the price of hamburgers, a shift in
the demand curve or a movement
along the demand curve?
Shift
b. Has the demand for slices of pizza
increased or decreased?
decreased
Are these examples going to cause a
movement along the curve or a
shift in the demand curve?
Graphing Demand
• In these circumstances, tell if the demand for a slice of pizza would
increase or decrease.
CHANGE
RESULT IN DEMAND
• Consumers make more money
Increase /
Decrease
• Hot dog prices increase
Increase /
Decrease
• Nacho prices decrease
Increase /
Decrease
• The popularity of eating pizza for
lunch increases
Increase /
Decrease
• Over-priced drinks are served
at the pizza stand
Increase /
Decrease
Are these examples going to cause a movement along
the curve or a shift in the demand curve? SHIFT
Graphing Demand
Are the prices for these goods elastic or inelastic?
Write an “e” for elastic and an “i” for inelastic.
______ a. Cars
______ h. Butter
______ b. Candy bars
______ i. CD
______ c. Medicine
______ j. Roses on
Valentines
Day
______ d. Pepsi
______ k. Electricity
______ e. Movie Ticket
______ f. Turkey on
Thanksgiving
______ g. Television
Demand Scenarios- Classwork
Reading Guide Homework
Describe a situation:
1. Where you would see inelastic demand
ex. I have inelastic demand for medicine for my cat, because I love her and will buy her
medicine even if it’s very expensive.
2. Where you would see elastic demand
3. Where you would get movement on the demand curve
ex. I usually only buy 1 bag of chips, but they were on sale so I bought 2.
This is
movement on the demand curve.
4. Where you would see a shift to the right for the demand
curve (give 2 examples)
5. Where you would see a shift to the left for the demand
curve (give 2 examples)
Homework
• 21.3 and 21.4, pages 232