Bell work Get your Freonomy and wait for

Bell work Get your Freonomy and wait for further instruction

When purchasing things to buy You evaluate your… willingness to buy ability to buy

Video Game $60

Bazbeaux’s Pizza 15

King’s Island Tickets $70

Private Jet $8, 000

Demand – Consumer Behavior Ms. Frey Mr. Westerfeld Mrs. Smith

What is Demand? demand- the willingness to buy a good or service and the ability to pay for it. law of demand. As prices fall… As prices increase… quantity demanded goes up quantity demanded goes down You have $10 and want to buy some music from i. Tunes. If prices of songs on i. Tunes rose from $. 99 to $3, how would your quantity demanded of songs change?

Cheryl’s DVD Demand Schedule demand schedule- a table that shows how much of a good or service an individual consumer is willing and able to purchase at each price in a market. Notice that when the price falls, the number of DVDs Cheryl will buy rises. When the price rises, the number she will buy falls. So quantity demanded and price have an inverse, or opposite relationship. Price per DVD ($) Quantity Demanded 30 0 25 1 20 2 15 3 10 4 5 7

Demand Curve demand curve- a graph that shows how much of a good or service an individual will buy at each price. (Displays the data from an individual demand schedule) Avoid common mistake- downward slope does not mean that quantity is decreasing How many DVDs will Cheryl buy when the price is $10?

Rafael’s DVD Market Demand Schedule Markets behave in the same way as individual consumers. As prices fall, the quantity demanded of DVDs rises. As prices rise, the quantity demanded falls. How did Rafael create a market demand schedule? Surveyed customers Reviewed sales figures to see how many DVDs he sold at each price Price per DVD ($) Quantity Demanded 30 50 25 market demand schedule- shows how much of a good or service all consumers are willing and able to buy at each price in a market. 75 20 100 15 125 10 175 5 300

Market Demand Curve market demand curve- shows the data found in the market demand schedule. (Shows the quantity that all consumers, or the market as a whole, are willing and able to buy at each price. ) At which price will Montclair Video Mart sell 175 DVDs? Cheryl was unwilling to buy any DVDs at $30. Montclair Video Mart can sell 50 DVDs at that price. How do you explain the difference?

Create a demand schedule showing how many pizzas you would buy at the prices of $25, $20, $15, $10 and $5. Price per Pizza ($) Quantity Demanded

Law of Demand As prices fall… quantity goes up. As prices increase… quantity demanded goes down P Qd or P Qd Inverse relationship between P and Q independent variable (P) dependent variable (Q) Called the “Price Effect” – Price caused consumer behavior to change…we buy more or less because of the change in price

Read and Take Notes on Chapter 4. 2 Pgs. 106 -113

More about Demand Curves Law of diminishing marginal utility- the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used.

Change in Quantity Demanded A change in quantity demanded does not shift the demand curve. The change refers to a movement along the curve itself. Each point on the curve represents a new quantity demanded. Classzone. com

Change in Demand www. classzone. com

Changes in Demand Income, Market Size, Consumer Tastes, Consumer Expectations, Substitute Goods, Complimentary Goods Change in demand of hotel rooms in Florida during the school year Market Size Change in demand of silly bands because WWFD (What Would Frey Do) bracelets have become more popular Consumer Tastes The price for peanut butter drops which results in the rise of demand for jelly Complements The prices of shorts and tank tops go on sale because the new fall clothing lines are arriving at stores Consumer Expectations Matt gets a raise at work so he decides to buy more normal goods and less inferior goods Income The price of Advil rises so people begin to buy the generic brands of ibuprofen. Substitute Goods

Demand Determinants Consumers D Consumer Income D Consumer Confidence D Consumer Preferences D Prices of Related Products: Substitutes P BUTTER D MARGARINE Complements P CAMERAS D FILM

D (Increase in demand)

D (Decrease in demand)

What is Elasticity of Demand? Chapter 4. 3

Critical Thinking Does quantity demanded always fall if the price rises? List 3 goods or services that you think would remain in demand even if the price rose sharply. Why does demand for those items change very little?

Key Concepts Buying habits affected by type of product and importance to consumer • Elasticity of demand- measure of how responsive consumers are to price changes Elastic- quantity demanded changes greatly as price changes Inelastic- quantity demanded changes little as price changes Firms must know the Price Elasticity of Demand of their product! Classzone. com

What determines elasticity? 1. Substitute goods or services 2. Proportion of Income 3. Necessity or Luxury

Total Revenue Test • Total revenue- amount of money company gets for selling its products Formula: Total Revenue= P (price) X Q (quantity sold) Total revenue test- shows total revenue from item at various prices If total revenue rises after price drops, demand is elastic If total revenue decreases after price drops, demand is inelastic