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Demand ch. 4

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Demand ch. 4

  1. 1. Intro to Demand Unit 4: Chapter 4 Economics
  2. 2. The Law of Demand As price increases ↑ : the quantity demanded decreases ↓ ● As price decreases ↓ : the quantity demanded increases ↑
  3. 3. Why does the law of Demand work? 2 factors… USUALLY…  If price goes up, you can’t afford to buy as much quantity for the same amount of money.  If the price goes up, you buy an alternative (and less quantity of the original good).
  4. 4. Market Demand Schedule  Willingness to demand (or buy) a good/service at ALL given prices.  Your graph above is a Market Demand Schedule Graph
  5. 5. Market Demand Schedule  Individual demand schedules get combined into a market demand schedule. ● Simply a column list of how much quantity a set of consumers demand at each price.
  6. 6. Change in Quantity Demanded: Just a Move Along the Demand Curve  Movement is based on the Law of Demand: as price changes, Quantity Demanded changes. At a price of $1.50, what is the total quantity of gizmos that this market demands?
  7. 7. CHANGE in Demand:  SHIFT IN THE ENTIRE LINE  Now, at the SAME Price ALL The sudden you want MORE or LESS.  Let’s try and see if it works with our class example. (Cookies)
  8. 8. What Shifts Demand: 1. Consumer Income  Increase income – people buy more; decrease income – people buy less.  Example: I get a raise so I buy that new car I’ve been needing!  Example: Class Student hits lottery, buys more cookies  Demand curve shifts – right if increase and left if decrease
  9. 9. 2. Substitutes  Concerns related/similar product that will be used in place of another product  Example: buy margarine if price of butter goes up  Note: result is Change in Demand for the substitute Margarine. Is change in quantity demanded for original/Butter due to its price changing THINK:  If Coke prices went up drastically, what would happen to the Demand of Faygo cola?
  10. 10. 3. Expectations (Future)  The way people think about the future – positive or pessimistic.  Example: Clothing store advertises BIG SALE NEXT WEEK.  Ex: news of more layoffs, people hold back on big purchases, luxury items…  Ex: forecast snow storm/snow day and moms run up to buy milk and rent videos for the kids
  11. 11. 4. Consumer Tastes  Change mind of product due to ads, celebrity, fashion trends/ gets ‘old’, seasonal tastes, hear something good/ bad about product re: health, environment…  Example: news story report: health risks of product  Example: media blitz for Iphone 6, Iwatch
  12. 12. 5. Compliments  Other related goods sold along with a product  Example: when Turkey goes on sale (see change in quantity demanded for the Turkey) see Change in Demand for gravy, stuffing, potatoes…  Example: Demand of Hotdogs if the price of hotdog buns TRIPLES!  Peanut butter & Jelly
  13. 13. 6. Number of Consumers (Market Size)  Increase in the number of people with demand for goods/services  Example: population increase due to immigration  Example: new market opens up –like China! Huge increase in number of consumers!