Download Unit II: Supply and Demand

What is demand?
More than just want of a good or
service. Must have:
• Desire to buy
• Ability, capacity to buy
• Willingness to buy product
• It is a mix of what consumers can
and will buy
Why study demand?
• Essential to workings of market
economy
• Important for sound business
planning
• Interacts with supply to affect
prices
What is a demand schedule?
• Amount demanded at each and
every price
• The Table
Price Quantity demanded
Anne’s Demand for Compact
Discs
Price
Quantity Demanded
$0
20
4
16
8
12
12
8
16
4
20
0
What is the demand curve?
• Illustrates price-quantity
observations in a graph
• Curve always slopes down- Why?
P
D
Q
•
•
•
•
•
•
What does the graph represent?
What does the curve look like?
Why is the curve sloping downward?
What kind of relationship is this?
What is this relationship called?
Which picture of demand is easier to
understand, the table or the graph ?
What is the law of demand?
• As price goes up, quantity demanded
goes down
•P Q
• As price goes down, quantity
demanded goes up
•P
Q
• This is known as an inverse
relationship