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Demand

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					      Before we begin,
 work with your tablemates to plot the
 following points. After you’re done,
  connect the dots with a curved line.


   Then, take ONE of your papers
          to Ms. Meadows
            to be graded.
Make sure everyone’s info. is the same!
What is Demand?
               21-1
       The consumer’s
       • desire  do you want it?
• willingness  will you pay the price?
  • and ability  do you have the $$?

     to buy a good/service
What is the Demand Schedule?
Turn to p. 571. This info. tells us how many
       goods/services you will purchase
      at each price they are being sold.

The demand schedule is on the (upper) left.
          It is the “list” of info.
By looking at the demand schedule,

• YOU are willing to buy:
  – 1 video games for $40
  – but 3 videos for $10


• Hmmmm? Why is that??
   – Because most people like a bargain! You’re
     also getting more goods for your money!
   What is the Demand Curve?
   It’s basically the same as the demand
                    schedule!
The only difference is that it is in the form of
                   a “graph.”
  On page 571, it is on the (upper) right.

• YOU are willing to buy:
  – 1 video games for $40
  – 1 video games for $30
  – and 3 videos for $10
                 Again!
• the list/chart  is the demand schedule
• the graph  is the demand curve

 Both have the EXACT same info. that tells
  how much you are willing to BUY at each
                  price!
                    Another Example:
This is why the demand curve slopes downward!

• As price goes down, quantity goes up!
•   $50
•   $40     1 pair of shoes            Look at the demand curve
                                       again for video games on
•   $30                                p.571. When you plot the
                                       points, it slopes down b/c
•   $20                                WE LIKE WHEN
                                       THINGS GO ON SALE!
•   $10
•   $5                         5 pairs of shoes!!
      So, the Law of Demand
               says…

                  Price & Quantity
              work in opposite directions


• As price goes down, quantity goes up! b/c we like a sale!
• As price goes up, quantity goes down! b/c we don’t like
                                                expensive goods!
        Individual Demand
                vs.
          Market Demand
• indiv. demand = one consumer’s demand
                             How many games will YOU buy?

               This is YOU!


• market demand = many consumers’ demand
                    How many games will ALL boys buy?
                    How many games will ALL 10th graders buy?
                    How many games will ALL girls buy?
         So, on page 571…
 The two boxes at the upper, top represent
        INDIVIDUAL DEMAND.



The two boxes at the lower, bottom represent
           MARKET DEMAND.

Remember, the ones on the left are schedules.
     The ones on the right are curves.
 Looking at the market demand on
               p.571
• consumers will buy 150 video games for $40

• But, consumers will buy 300 video games for
  $10
                         What is Utility?
     The pleasure, usefulness, satisfaction you get from a product


•   I like this product!
•   This product is useful to my tummy!
•   I get satisfaction from this product!
•   Therefore, I will BUY this product!
 Unfortunately, we will soon get tired of eating
          this product after 3 hours.

• The utility we get from consumption of
  this pizza usually changes as we more &
  more of it.
       By the 6th slice of pizza,
 your utility ( pleasure/satisfaction)
        has usually decreased.
              Therefore,
your need for it…your hunger for it…
   has diminished (or decreased).

 This is diminishing marginal utility!!
        What are the
Factors that Affect Demand?
             21-2

            In other words,
 what influences your decision to buy a
               product?
                 Price?
                Color?
                 Style?
        ?????????????????????
    Remember…
    Demand is your
      YOUR
       •desire
     •willingness
       •ability

to buy a good/service
    Factor #1: Changes in Population
Increase in demand:                Decrease in demand:
• If a new apartment building is   • If our school or even Baptist
  built next to our school, what     Hospital closes down,
  businesses would see an            businesses around here would
  increase in demand?                see a decrease in demand.
                                   • = fewer customers, demand
                                     goes down 
• Hardees, the BP gas station…
= more customers, demand goes
   up 
 Factor #2: Changes in Consumers’
          Taste (or style)
Increase in demand:                              Decrease in demand:
• When goods are                                 • When goods go out of
  popular!                                         style…
• What’s “in” this year?                         • What’s old?
    –   Skinny jeans, off-the-shoulder shirts,     –   Platform shoes, jersey dresses, baggy
        etc.                                           jeans




                                                              Few consumers!

Lots of consumers! Demand goes up!                            Demand goes down!
 Factor #3: Changes in Consumers’
            Income ($$$)
Increase in demand:      Decrease in demand:
• people have $$, they   • people don’t have $$,
  buy!!                   they don’t buy. 

               Demand
               goes
                                         Demand
                                         goes
 Factor #4: Changes in Consumers’
            Expectations
Increase in demand:                Decrease in demand:
• a new product comes out, and     • you see on TV that a new iPod
  everybody goes to buy it b/c       or cell phone is coming out, so
                                     you wait patiently b/c you
  people expect that the newer
                                     expect that the newer product
  version is way better than the     will be so much better than the
  old one.                           old one that’s out now.
               Demand                                     Demand
               goes                                       goes
               for                                        for
               iPods                                      CDs
    Factor #5: Changes in Substitutes
Increase in Demand                        Decrease in Demand
• Items that can be substituted…          • When the price of one goes up,
   (drink orange juice instead of milk)     the price of the substitute also
   (eat waffles instead of pancakes)        goes up b/c the 2nd product
• When the price of one goes                wants to keep up with the
  down, the price of the                    competition. But, consumers
  substitute also goes down b/c             don’t like when prices go up.
  the 2nd product doesn’t want to           Demand goes
  lose customers. Demand goes



              versus
                                                         versus
Factor #6: Changes in Complements
• Items that are used                      Price of DVD goes
  together…
     –   sugar & Kool-Aid
     –   waffles & syrup
     –   lamp & light bulbs
     –   DVDs & DVD players


 •When the price of one                   Price of DVDs goes
 goes up, the price of the
 complement goes down.


(Usually, consumers aren’t willing to pay for two goods increasing at the same time!)
   Elastic vs. Inelastic Demand
      First, remember that anything that is “elastic” can be
                   stretched and it’s flexible.
Elastic Demand:
• when the price changes, we are not affected by it
  b/c we can find a substitute to replace that
  particular good or service.           price of coffee



The price can go way up, and demand will change or
stretch b/c we will buy a cheaper coffee…demand
changed…demand stretched.
                Inelastic Demand
  Anything that is “inelastic” can’t be stretched, it’s not
  flexible, it stays the same & remains still.

  Inelastic Demand:
  • when price changes, we are affected b/c there
    isn’t a substitute to replace the item needed

•price of prescription medicines
                             The price can go way up, and demand
                             will not change or stretch. Demand
                             will stay the same b/c people need their
                             medicine…inelastic demand.
      Again…
    Demand is your
      YOUR
       •desire
     •willingness
       •ability

to buy a good/service
You! You! You!

You are the consumer!
 You are DEMAND!

				
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posted:9/21/2011
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