2. The Basics of Demand
Economists study markets.
– A market is any place where people come together
to buy and sell goods or services.
“Demand” - the willingness AND ability of
consumers to buy a good or service at a
specific period of time
– Willingness: ready to buy a good or service
– Ability: having the means to buy the good or service
3. The Law of Demand
The quantity demanded varies inversely
with price, other things constant (a.k.a.
Price Effect)
Price = Quantity demanded
Price = Quantity demanded
4. How We Look at Demand -- The
Demand Schedule and Curve
A schedule is a table that lists the
quantity of a good that a person
will purchase at each price. This
is the STORY.
The vertical axis ALWAYS shows
price
The horizontal axis ALWAYS
shows quantity demanded
Plot the points on the schedule
Connect the dots!!
The Demand curve slopes Down.
Now you have created a
PICTURE OF THE STORY.
D
Q
P
5. What is the difference between
demand and quantity demanded?
Demand is a schedule (the story) or curve (the
picture) that shows the various amounts of a
product that consumers are willing and able to
purchase at each of a series of possible prices
during a specified period of time
– Example: Michael has a demand for ice cream. This means he
has the willingness AND ability to buy ice cream.
Quantity demanded refers to how many units
will be demanded at a particular price.
– Example: Suppose the price of ice cream is $3 per cone and
Michael buys two. Therefore two ice cream cones is the quantity
demanded at $3.
6. Movement Along a Demand
Curve Versus a Shift of the
Curve
Remember there is a difference between quantity
demanded and demand.
Markets never stand still, there are always outside
factors that change the actual price of the good or
how much is demanded altogether.
A change price creates a change in the quantity
demanded, other things constant.
– This causes a movement along the demand curve.
A change in one of the determinants of demand
causes a change in demand.
– This causes in a shift of a demand curve.
8. Practice Problem #1
What would happen to the demand of
bottles of an energy drink if the prices
doubled?
Increase or decrease in quantity
demanded (Qd)?
9. Answer to Practice Problem #1
What would happen to the demand
for energy drinks if the price
doubled?
Decrease in quantity demanded
10. How would it look on the graph?
Quantity
(Q)
Price
(P)
11. How would it look on the graph?
Quantity
(Q)
Price
(P)
12. Practice Problem #2
What would happen to the demand of
bottles of an energy drink if they went on
sale so that price per bottle decreased?
Increase or decrease in quantity demanded (Qd)?
13. Practice Problem #2
What would happen to the demand of
bottles of an energy drink if they went
on sale so that price per bottle
decreased?
Increase in quantity demanded (Qd)
15. How would it look on the graph?
Quantity
(Q)
Price
(P)
$1.00
$.50
0 4 8 12 16
D
A
B
16. Why do changes (Δ) in price cause
movement along the demand curve?
Quantity
(Q)
Price
(P)
Demand (D)
Hinweis der Redaktion
Arnold, Roger A. Economics In Our Time (Teacher's Edition). Grand Rapids: West Educational, 1999.
McEachern, William A. Contemporary Economics. Mason, Ohio: Thomson South-Western, 2005.
Change in quantity demanded
A movement along the demand curve is caused by a change in PRICE of the good or service. For instance, a fall in the price of the good results in an EXTENSION of demand (quantity demanded will increase), while an increase in price causes a CONTRACTION of demand (quantity demanded will decrease). Cause a change in the quantity demanded, not the actual demand.