Download demand

DEMAND
BY ALANNA SMYTH
DEMAND…..
 Means
the number of units
of a good which consumers
are willing to purchase at
any given market price at
any given time
Demand is displayed on ….
 DEMAND SCHEDULES – table showing the
demand for a good at any given market price at
any given time
 DEMAND CURVES – graph showing the
demand for a good at any given market price at
any given time
DEMAND SCHEDULE
 The demand
schedule on the right
displays the demand
for gasoline.
 As the price for the
gasoline increases,
demand decreases.
DEMAND CURVE

The demand curve
on the right shows
us that as the
price increases
from 20p to 50p,
the quantity
demanded
decreases from
just over 400 to
100.
Utility

Utility is the
amount of benefit
or satisfaction
derived from the
consumption of a
good or service.
Marginal Utility

Marginal utility is
the increase in
benefit or
satisfaction
derived from the
consumption of an
extra unit of the
good or service.
 The law states that as a consumer
consumes extra units of a good, then
at some stage the marginal utility ,ie.
the increase in benefit or satisfaction
derived from the consumption of an
extra unit of the good or service, will
decrease.
 The law of diminishing marginal utility
only applies after the origin
 The total utility is not totally used up
before the next unit is consumed.
 Income doesn’t change
 It doesn’t apply to addictive goods or
to medicines
An Economic Good

An economic good is one which commands a
price , ie. a product which people are willing
to pay for
Characteristics of an economic good



It must give utility: The consumer must get
satisfaction or benefit from its consumption
It must be transferable: The ownership or the
benefit of it must be transferable from the
seller to the buyer
It must be scarce in relation to the demand
for it: would you pay for sand at a sandy
beach to build sandcastles?
Assumptions made about Consumers




It’s assumed that consumers act rationally.
It’s assumed that consumers have limited incomes
It is assumed that consumers aim to get their
maximum utility from the way they spend their
incomes
It is assumed that consumers are subject to the Law
of Diminishing Marginal Utility.
Law Of Equi-Marginal Utility

•
It states that a consumer will be in
*equilibrium when his/her income is spent
in such a way that the ratio of marginal utility
(MU) to price (P) is the same for all goods
which he/she consumes.
*Equilibrium means the ideal situation to be in
under any given set of circumstances. When
consumers are in equilibrium it means that
they are getting the maximum possible utility
from their income.
Law of Equi-Marginal Utility
 MU of good A = MU of good B
P of good A
P of good B
=MU of good C
P of good C
Exam Questions
 2011 Section B Question1
Give