Chapter 4 Demand CHAPTER INTRODUCTION SECTION 1

Chapter 4 Demand

CHAPTER INTRODUCTION SECTION 1 What Is Demand? SECTION 2 Factors Affecting Demand SECTION 3 Elasticity of Demand CHAPTER SUMMARY CHAPTER ASSESSMENT 2 Click a hyperlink to go to the corresponding section. Press the ESC key at any time to exit the presentation.

Economics and You In Chapter 4, you will learn that demand is more than a desire to buy something: it is the ability and willingness to actually buy it. Click the Speaker button to listen to Economics and You. 3

Chapter Objectives Section 1: What Is Demand? • Describe and illustrate the concept of demand. • Explain how demand utility are related. 4

Chapter Objectives Section 2: Factors Affecting Demand • Explain what causes a change in quantity demanded. • Describe the factors that could cause a change in demand. 5 Click the mouse button or press the Space Bar to display the information.

Chapter Objectives Section 3: Elasticity of Demand • Explain why elasticity is a measure of responsiveness. • Analyze the elasticity of demand for a product. • Understand the factors that determine demand. 6 Click the mouse button or press the Space Bar to display the information.

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Study Guide Main Idea Demand is a willingness to buy a product at a particular price. 8 Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 89 of your textbook.

Study Guide (cont. ) Key Terms – demand – microeconomics – demand schedule – demand curve – Law of Demand – market demand curve – marginal utility – diminishing marginal utility 9 Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 89 of your textbook.

Study Guide (cont. ) Objectives After studying this section, you will be able to: – Describe and illustrate the concept of demand. – Explain how demand utility are related. Applying Economic Concepts Demand You express your demand for a product when you are willing and able to purchase it. Read to find out how demand is measured. Click the Speaker button to listen to the Cover Story. 10 Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 89 of your textbook.

Introduction • People sometimes think of demand as the desire to have or to own a certain product. • In this sense, anyone who would like to own a swimming pool could be said to “demand” one. • In order for demand to be counted in the marketplace, however, desire is not enough; it must coincide with the ability and willingness to pay for it. 11 Click the mouse button or press the Space Bar to display the information.

Introduction (cont. ) • Only those people with demand—the desire, ability, and willingness to buy a product-can compete with others who have similar demands. • Demand, like many other topics in Unit 2 is a microeconomic concept. • Microeconomics is the area of economics that deals with behavior and decision making by small units, such as individuals and firms. 12

Introduction (cont. ) • Collectively, these concepts of microeconomics help explain how prices are determined and how individual economic decisions are made. 13

An Introduction to Demand • Demand is the desire, ability, and willingness to buy a product. • An individual demand curve illustrates how the quantity that a person will demand varies depending on the price of a good or service. • Economists analyze demand by listing prices and desired quantities in a demand schedule (chart). When the demand data is graphed, it forms a demand curve with a downward slope. 14 Click the mouse button or press the Space Bar to display the information.

An Introduction to Demand (cont. ) 15

An Introduction to Demand (cont. ) 16

Discussion Question Think about something you have been wanting to buy. What is its price? At what price would you be willing to buy the item? Answers will vary, but students should demonstrate an understanding of the concept of demand. 17 Click the mouse button or press the Space Bar to display the answer.

The Law of Demand • The Law of Demand states that the quantity demanded of a good or service varies inversely with its price. When price goes up, the quantity demanded goes down; when price goes down, the quantity demanded goes up. • A market demand curve illustrates how the quantity that all interested persons (the market) will demand varies depending on the price of a good or service. 18 Click the mouse button or press the Space Bar to display the information.

Discussion Question Why is price a consumer’s obstacle to buying? Answers will vary, but may include that a consumer’s money is limited, and the price of a product forces the consumer to determine how much his or her demand is for the product. 19 Click the mouse button or press the Space Bar to display the answer.

Demand Marginal Utility • Marginal utility is the extra usefulness or satisfaction a person receives from getting or using one more unit of a product. • The principle of diminishing marginal utility states that the satisfaction we gain from buying a product lessens as we buy more of the same product. 20 Click the mouse button or press the Space Bar to display the information.

Discussion Question You have read about buying a cola as an example of diminishing marginal utility. What is another case in which more product gives less satisfaction? Answers will vary, but students should demonstrate an understanding of the concept of diminishing marginal utility. 21 Click the mouse button or press the Space Bar to display the answer.

Section Assessment Main Idea Using your notes from the graphic organizer activity on page 89, write a definition of demand in your own words. Answers should include the desire, ability, and willingness to buy a product. 22 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Describe the relationship between the demand schedule and demand curve. Both provide information about demand–the schedule in the form of a table and the curve in the form of a graph. 23 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Describe how the slope of the demand curve can be explained by the principle of diminishing marginal utility. Diminishing marginal utility says that as we use more of a product, we are not willing to pay as much for it. Therefore, the demand curve is downward sloping. People will not pay as much for the second and third product as they will for the first. 24 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Using Graphs Create your own demand schedule for an item you currently purchase. Next, plot your demand schedule on a demand curve. Be sure to include correct labels. Answers should reflect an understanding of demand schedules and curves. 25 Click the mouse button or press the Space Bar to display the answer.

Section Close Choose an item that you buy regularly, for example a food item or jeans, and create a simple demand schedule and curve for that item. 26

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Study Guide Main Idea There a number of factors that will cause demand to either increase or decrease. Reading Strategy Graphic Organizer As you read about the determinants of demand, list each on a table similar to the on page 95 of your textbook and provide an example of each. 28 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 95 of your textbook.

Study Guide (cont. ) Key Terms – change in quantity demanded – income effect – substitution effect – change in demand – substitutes – complements 29 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 95 of your textbook.

Study Guide (cont. ) Objectives After studying this section, you will be able to: – Explain what causes a change in quantity demanded. – Describe the factors that could cause a change in demand. Applying Economic Concepts Change in Demand Would you buy more clothes if your employer doubled your salary? Read to find out what causes a change in demand. Click the Speaker button to listen to the Cover Story. 30 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 95 of your textbook.

Introduction • The demand curve is a graphical representation of the quantities that people are willing to purchase at all possible prices that might prevail in the market. • Occasionally something happens to change people’s willingness and ability to buy. • These changes are usually of two types: a change in the quantity demanded, and a change in demand. 31 Click the mouse button or press the Space Bar to display the information.

Did You Know? • In 1983, the first audio compact discs were introduce to U. S. consumers. Within five years, record companies had begun to phase out the vinyl albums on which music was traditionally played because sales figures had shown that consumers preferred CD technology. 32 Click the mouse button or press the Space Bar to display the information.

Change in Quantity Demanded • The change in quantity demanded shows a change in the amount of the product purchased when there is a change in price. • The income effect means that as prices drop, consumers are left with extra real income. • The substitution effect means that price can cause consumers to substitute one product with another similar but cheaper item. 33 Click the mouse button or press the Space Bar to display the information.

Change in Quantity Demanded (cont. )

Discussion Question Imagine you have a weekly budget for groceries. When you shop one week, certain items you needed were on sale, and after you paid the cashier, you had $20 left. What would you do with the extra money? Answers will vary. Students should explain how their responses illustrate the income effect. 35 Click the mouse button or press the Space Bar to display the answer.

Change in Demand • A change in demand is when people buy different amounts of the product at the same prices. • A change in demand can be caused by a change in income, tastes, a price change in a related product (either because it is a substitute or complement), consumer expectations, and the number of buyers. 36 Click the mouse button or press the Space Bar to display the information.

Change in Demand (cont. )

Discussion Question Although CDs are by far today’s most popular form of musical recording, interest in “vinyls” (the word people now use to refer to the old vinyl albums) is growing. What might happen to the demand for vinyls as interest increases? Students should indicate that increased interest probably will lead to an increase in demand for vinyls. 38 Click the mouse button or press the Space Bar to display the answer.

Section Assessment Main Idea How does the income effect explain the change in quantity demanded that takes place when the price goes down? Because of the decrease in price, consumers have more real income, leading to an increase in the quantity demanded of a product. 39 Click the mouse button or press the Space Bar to display the answer.

Section Assessment Describe the difference between a change in quantity demanded and a change in demand. A change in quantity demanded reflects a change in the quantity of the product purchased in response to a change in price. A change in demand reflects a willingness to buy different amounts of the product at the same price. 40 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Explain how a change in price affects the demand for a product’s substitute(s). The demand for a product tends to increase if the price of its substitutes goes up, and vice versa. 41 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Understanding Cause and Effect What happens to the price and the quantity of goods and services sold when a store runs a sale? How do these factors relate to the downwardsloping curve? A reduction in prices during a sale leads to an increase in quantity of products sold. The downward slope of the demand curve reflects these trends as prices decrease and quantity increases. 42 Click the mouse button or press the Space Bar to display the answer.

Section Close Write a paragraph explaining all of the determinants that can lead to a change in individual demand. 43

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Study Guide Main Idea Consumers react differently to price changes depending on whether the good is a necessity or a luxury. Reading Strategy Graphic Organizer As you read about price elasticity, complete a web like the on page 101 of your textbook to illustrate what effect a change in price has on products that are elastic, inelastic, or unit elastic. 45 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 101 of your textbook.

Study Guide (cont. ) Key Terms – elasticity – inelastic – demand elasticity – unit elastic – elastic Objectives After studying this section, you will be able to: – Explain why elasticity is a measure of responsiveness. – Analyze the elasticity of demand for a product. – Understand the factors that determine demand elasticity. 46 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 101 of your textbook.

Study Guide (cont. ) Applying Economic Concepts Elasticity of Demand What are you willing to pay to see a popular movie? Read to find out about the elasticity of demand for a product and what factors influence your willingness and ability to pay for a product. Click the Speaker button to listen to the Cover Story. Section 3 begins on page 101 of your textbook. 47

Introduction • Cause-and-effect relationships are important in the study of economics. • For example, we often ask, “if one thing happens, how will it affect something else? ” • An important cause-and-effect relationship in economics is elasticity, a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price. 48 Click the mouse button or press the Space Bar to display the information.

Introduction (cont. ) • Elasticity is also a very general concept that can be applied to income, the quantity of a product supplied by a firm, or to demand. 49 Click the mouse button or press the Space Bar to display the information.

Did You Know? • The drugs needed to get or stay well can take a large portion of a consumer’s income, especially if that income is fixed. However, the use of generic drugs had offered consumers a cheaper alternative to drugs with brand names. After the founding drug company’s patent on a brand-name drug has expired, another drug company can create a generic drug. 50 Click the mouse button or press the Space Bar to display the information.

Demand Elasticity • Elasticity measures how sensitive consumers are to price changes. • Demand is elastic when a change in price causes a large change in demand. • Demand is inelastic when a change in price causes a small change in demand. • Demand is unit elastic when a change in price causes a proportional change in demand. 51 Click the mouse button or press the Space Bar to display the information.

Discussion Question What are examples of items for which an increase in price would cause you or your family to reconsider buying them? Answers will vary but should illustrate an understanding of price elastic demand. 52 Click the mouse button or press the Space Bar to display the answer.

The Total Expenditures Test • Price times quantity demanded equals total expenditures. • Changes in expenditures depend on the elasticity of a demand curve—if the change in price and expenditures move in opposite directions on the curve, the demand is elastic, if they move in the same direction, the demand is inelastic; if there is no change in expenditures, demand is unit elastic. • Understanding the relationship between elasticity and profits can help producers effectively price their products. 53 Click the mouse button or press the Space Bar to display the information.

The Total Expenditures Test (cont. )

Discussion Question What are examples of items for which a drop in price would not encourage you to buy more of an item? Answers will vary but should reflect an understanding of the relationship between demand elasticity. 55 Click the mouse button or press the Space Bar to display the answer.

Determinants of Demand Elasticity • Demand is elastic if the answer to the following questions are “yes”. – Can the purchase be delayed? Some purchases cannot be delayed, regardless of price changes. – Are adequate substitutes available? Price changes can cause consumers to substitute on product for a similar product. – Does the purchase use a large portion of income? Demand elasticity can increase when a product commands a large portion of a consumer’s income. 56 Click the mouse button or press the Space Bar to display the information.

Determinants of Demand Elasticity (cont. )

Discussion Question What are some things you buy for which price is not the issue? Answers will vary but should reflect items whose purchases cannot be delayed, regardless of price. 58 Click the mouse button or press the Space Bar to display the answer.

Section Assessment Main Idea What luxuries do you think would have a higher price elasticity than others? Give three examples and explain why you think they would have an exceptionally high elasticity. Answers will vary but should reflect an understanding of price elasticity. 59 Click the mouse button or press the Space Bar to display the answer.

Section Assessment Describe three determinants of demand elasticity. Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income? 60 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Explain why the demand for insulin is inelastic. There is a lack of adequate substitutes for insulin. 61 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Explain why an item that has many close substitutes tends to have an elastic demand. Because consumers can switch among the various substitutes. 62 Click the mouse button or press the Space Bar to display the answer.

Section Assessment (cont. ) Understanding Cause and Effect A hamburger stand raised the price of its hamburgers from $2. 00 to $2. 50. As a result, its sales of hamburgers fell from 200 per day to 180 per day. Was the demand for its hamburgers elastic or inelastic? How can you tell? The demand is inelastic because a 25 percent increase in price resulted in a 10 percent decrease in units sold. 63 Click the mouse button or press the Space Bar to display the answer.

Section Close Draw graphs representing the various types of elasticity. Be prepared to explain how each type works. 64 Click the mouse button or press the Space Bar to display the answer.

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Section 1: What Is Demand? • Microeconomics is the area of economic study that deals with individual units in an economy, such as households, business firms, labor unions, and workers. • You express demand for a product when you are both willing and able to purchase it. • Demand can be summarized in a demand schedule, which shows the various quantities that would be purchased at all possible prices that might prevail in the market. • Demand can also be shown graphically as a downward sloping demand curve. 66 Click the mouse button or press the Space Bar to display the information.

Section 1: What Is Demand? (cont. ) • The Law of Demand refers to the inverse relationship between price and quantity demanded. • Individual demand curves for a particular product can be added up to get the market demand curve. • Marginal utility is the amount of satisfaction an individual receives from consuming one additional unit of a particular good or service. • Diminishing marginal utility means that with each succeeding unit, satisfaction decreases. 67 Click the mouse button or press the Space Bar to display the information.

Section 2: Factors Affecting Demand • Demand can change in two ways–a change in quantity demanded or a change in demand. • A change in quantity demanded means people buy a different quantity of a product if that product’s price changes, appearing as a movement along the demand curve. • A change in demand means that people have changed their minds about the amount they would buy at each and every price. It is represented as a shift of the demand curve to the right or left. • A change in consumer incomes, tastes and expectations, and the price of related goods causes a change in demand. 68 Click the mouse button or press the Space Bar to display the information.

Section 2: Factors Affecting Demand (cont. ) • Related goods include substitutes and complements. A substitute is a product that is interchangeable in use with another product. A complement is a product that is used in conjunction with another product. • The market demand curve changes whenever consumers enter or leave the market, or whenever an individual’s demand curve changes. 69 Click the mouse button or press the Space Bar to display the information.

Section 3: Elasticity of Demand • Elasticity is a general measure of responsiveness that relates changes of a dependent variable such as quantity to changes in an independent variable such as price. • Demand elasticity relates changes in the quantity demanded to changes in price. • If a change in price causes a relatively larger change in the quantity demanded, demand is elastic. • If a change in price causes a relatively smaller change in the quantity demanded, demand is inelastic. 70 Click the mouse button or press the Space Bar to display the information.

Section 3: Elasticity of Demand (cont. ) • When demand is elastic, it stretches as price changes. Inelastic demand means that price changes have little impact on quantity demanded. • Demand is unit elastic if a change in price causes a proportional change in quantity demanded. • The total expenditures test can be used to estimate demand elasticity. • Demand elasticity is influenced by the ability to postpone a purchase, by the substitutes available, and by the proportion of income required for the purchase. 71 Click the mouse button or press the Space Bar to display the information.

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Identifying Key Terms Match the letter of the term best described by each statement. ___ the desire, ability, and willingness to buy a product B ___ a movement along the demand curve showing F that a different quantity is purchased in response to a change in price ___ a statement that more will be demanded at lower G prices and less at higher prices A. demand schedule B. demand C. microeconomics D. change in demand 73 E. demand curve F. change in quantity demanded G. Law of Demand H. elastic demand Click the mouse button or press the Space Bar to display the answer. The Chapter Assessment is on pages 110– 111.

Identifying Key Terms (cont. ) Match the letter of the term best described by each statement. ___ a listing in a table that shows the quantity demanded A at all possible prices in the market at a given time ___ a principle illustrating that consumers demand D different amounts at every price, causing the demand curve to shift to the left or the right ___ the field of economics that deals with behavior and C decision making by individuals and firms A. demand schedule B. demand C. microeconomics D. change in demand 74 E. demand curve F. change in quantity demanded G. Law of Demand H. elastic demand Click the mouse button or press the Space Bar to display the answer.

Identifying Key Terms (cont. ) Match the letter of the term best described by each statement. ___ a principle illustrating that a relatively small change H in price causes a relatively large change in the quantity demanded ___ a graph that shows the quantity demanded at all E possible prices in the market at a given time A. demand schedule B. demand C. microeconomics D. change in demand 75 E. demand curve F. change in quantity demanded G. Law of Demand H. elastic demand Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts Describe a demand schedule and a demand curve. How are they alike? A demand schedule is a list that shows the quantities demanded for a product at all prices that prevail in the market. A demand curve shows the same data in graphic form. 76 Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts (cont. ) Explain how the principle of diminishing marginal utility is related to the downward-sloping demand curve. Diminishing marginal utility states that as we use more of a product, we are not willing to pay as much for it. People will not pay as much for the second and third product as they did for the first, therefore the demand is downward sloping. 77 Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts (cont. ) Describe the difference between the income effect and the substitution effect. The income effect is the change in quantity demanded due to a change in price that alters consumers’ real income. The substitution effect is the change in quantity demanded due to the change in the relative price of the product. 78 Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts (cont. ) Identify the five factors that can cause a change in market demand. The five factors that can cause a change in market demand are: – – – 79 consumer income consumer tastes substitutes and complements change in expectations number of consumers Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts (cont. ) Describe the difference between elastic demand inelastic demand. When demand is elastic, there is a relatively large change in quantity demanded when the price changes, giving the demand curve a flat slope. The change in quantity demanded is much smaller for inelastic demand, making the slope of the demand curve steeper. 80 Click the mouse button or press the Space Bar to display the answer.

Reviewing the Facts (cont. ) Explain how the total expenditures test can be used to determine demand elasticity. By observing the change in total expenditures when the price changes, you can determine demand elasticity. If expenditures and price move in opposite directions, demand is elastic, If they move in the same direction, demand is inelastic. If expenditures do not change, demand is unit elastic. 81 Click the mouse button or press the Space Bar to display the answer.

Thinking Critically Making Generalizations Do you think the Law of Demand accurately reflects most people’s behavior regarding certain purchases? Explain. Answers will vary, but most will note that when prices fall, consumers tend to demand more of a product. 82 Click the mouse button or press the Space Bar to display the answer.

Thinking Critically (cont. ) Drawing Conclusions What would normally happen to a product’s market demand curve in a growing and prosperous community if consumer tastes, expectations, and the prices of related products remained unchanged? An increase in the number of consumers would shift the market demand curve to the right. 83 Click the mouse button or press the Space Bar to display the answer.

Applying Economic Skills Demand Why do you think a knowledge of demand would be useful to an individual like yourself? To a businessperson like Keith Clinkscales (cover story, page 89)? Knowledge of demand will help an individual make more informed decisions as a consumer. Business people need such knowledge in order to run their businesses effectively. 84 Click the mouse button or press the Space Bar to display the answer.

Applying Economic Skills (cont. ) Demand How do you think the market demand curve for pizza would be affected by (1) an increase in everyone’s pay, (2) a successful pizza advertising campaign, (3) a decrease in the price of hamburgers, and (4) new people moving into the community? Explain your answers. (1) Demand would increase since more people could afford to buy pizza. (2) Demand would increase as more people became aware of pizza. (3) Demand would decrease since people would buy more hamburgers. (4) Demand would increase as more consumers would buy pizza. 85 Click the mouse button or press the Space Bar to display the answer.

Applying Economic Skills (cont. ) Demand Elasticity How would you, as a business owner, use your knowledge of demand elasticity to determine the price of your product? If demand is elastic, lower the price to increase total business revenues. If demand is inelastic, raise the price to increase business revenues. 86 Click the mouse button or press the Space Bar to display the answer.

Applying Economic Skills (cont. ) How would a successful advertising campaign affect the elasticity of demand for the advertised product? Explain. It would make demand more inelastic. Some people would be influenced by the advertising and would demand the advertised product rather than buy a substitute. 87 Click the mouse button or press the Space Bar to display the answer.

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Research and write a report about a product or service for which you believe there will be a high demand in the twenty-first century. – Explain why you think such a high demand will exist. – Use the Internet and financial magazines to make predictions about the product or service’s potential growth. – Create charts and graphs to support your position.

Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the Economics: Principles and Practices Web site. At this site, you will find interactive activities, current events information, and Web sites correlated with the chapters and units in the textbook. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http: //epp. glencoe. com/sec/socialstudies/economics/econ principles 2005/index. php

Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the Business. Week Web site. At this site, you will find up-to-date information dealing with all aspects of economics. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http: //www. businessweek. com

Housing Starts The number of housing starts shows the demand for new homes. Economists forecast housing starts by using the current month’s permits as a predictor. Building permits tend to move in tandem with starts on a monthto-month basis. They are also considered to be a leading indicator of the economy in general. Increases in building permits and starts are common during periods following a drop in mortgage rates.

Finland is becoming the leader in cell-phone technology. Some 58 percent of all Finns own a cell phone; by the year 2004, the devices will outnumber Finland’s population of five million people.

Trading Gold for Salt Just as gold and salt were necessary trading commodities in some parts of Africa, so are oil and iron ore in some regions of the world today. The Japanese, for example, produce automobiles. They must trade with other countries, however, to obtain the raw materials needed to produce those automobiles.

The demand for some products has become more elastic because of technological innovations. VCRs, for example, have allowed consumers to substitute home viewing of movies for going to a movie theater. As a result, demand for tickets to movie theaters has become more elastic.

College Textbooks Online Shopping Click on a hyperlink to choose that topic.

Companies now sell college textbooks over the Internet. Universities enroll online and provide the required reading lists for their classes. Students can buy new and used textbooks from these lists, saving up to 40 percent on the cost of books. There is an economic incentive for colleges to use these Internet companies: the colleges receive a share in the revenue.

More About … Online Shopping E-commerce is finally becoming a popular method of shopping. Although there has been no significant change in the technology, sales over the Internet are increasing due to the confidence level of the consumer. In 1998, more than half of Web users had been online for over a year. More people are comfortable with navigating the Internet and using it for information. Continued on next slide.

Other factors have led to increased usage of the Web for shopping. Safety features have improved, so there is diminishing fear of hackers stealing credit card numbers. Web sites are better, too, and are often interactive, colorful, and informative. Many people find that the Internet allows them to save money because it is convenient for quick price comparisons.

There are drawbacks to shopping on the Internet, however. If you know what you want to buy, electronic shopping is almost always faster than traditional shopping. If you don’t know, it can become tedious waiting for images to download. If a site doesn’t take credit cards, you must print out an order sheet and order the items again.

For many people, though, the benefits of being able to shop in your pajamas at any time of the day outweigh the drawbacks of online shopping. Have students discuss if they believe online shopping will make traditional shopping obsolete.

Holding the Fries “At the Border” Mc. Donald’s opened its first restaurant in Des Plaines, Illinois, in 1955. In 1967 Mc. Donald’s opened its first restaurants in cities in other countries. Today, the company operates nearly 25, 000 Mc. Donald’s restaurants in 115 countries on six continents. Read the Business. Week Newsclip article on page 100 of your textbook. Read to find out how Mc. Donald’s must adapt its menu to local tastes. Continued on next slide. This feature is found on page 100 of your textbook. Click the Speaker button to listen to an audio introduction.

Holding the Fries “At the Border” Understanding Cause and Effect Why did Mc. Donald’s change its menu in Indonesia? The collapse of the rupiah made the cost of imports such as potatoes quintuple in price. Since people could not afford to pay for potatoes, Mc. Donald’s was forced to find a substitute product, rice, which could be used instead. Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 100 of your textbook.

Holding the Fries “At the Border” Synthesizing Information Did Mc. Donald’s introduce rice to its Indonesian menu in response to a change in consumer tastes? Explain your reasoning. Answers will vary but should reflect knowledge of consumer tastes and substitutes. Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 100 of your textbook.

Holding the Fries “At the Border” Making Predictions What will happen if the change in the menu increases demand? Explain your answer. If the change in menu increases demand, more rice will be produced, stimulating the Indonesian economy. Prices might increase as well. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 100 of your textbook.

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Economics and You Video 5: What Is Demand? After viewing What Is Demand? , you should be able to: • Explain the Law of Demand. • Differentiate between elastic and inelastic demand. Continued on next slide. Click the mouse button or press the Space Bar to display the information.

Economics and You Video 5: What Is Demand? Side 1 Disc 1 Chapter 5 Click the Videodisc button anytime throughout this section to play the complete video if you have a videodisc player attached to your computer. Click the Forward button to view the discussion questions and other related slides. Click inside the box to play the preview. Continued on next slide.

Economics and You Video 5: What Is Demand? How does inelastic demand differ from elastic demand? When demand for a product or service does not change in reaction to price changes, the demand is inelastic. Side 1 Disc 1 Chapter 5 Click the mouse button or press the Space Bar to display the answer.

Understanding Cause and Effect Understanding cause and effect involves considering why an event took place. A cause is the action or situation that produces an event. What happens as a result of a cause is an effect. Continued on next slide. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Learning the Skill To identify cause-and-effect relationships, follow these steps: – Identify two or more events or developments. – Decide whether one event caused the other. Look for “clue words” such as because, led to, brought about, produced, as a result of, so that, since, and therefore. – Look for logical relationships between events, such as “She overslept, and then she missed her bus. ” Continued on next slide. Click the mouse button or press the Space Bar to display the information. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Learning the Skill (cont. ) – Identify the outcomes of events. Remember that some effects have more than one cause, and some causes lead to more than one effect. Also, an effect can become the cause of yet another effect. Continued on next slide. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Practicing the Skill Analyze the following statements. Then, identify the causes and effects found in each statement. 1. Historically, prices have shown their greatest fluctuations in times of war. cause: war; effect: greater price fluctuation 2. The government also is confronted with scarcity, and must make choices. cause: scarcity; effect: government must make choices Continued on next slide. Click the mouse button or press the Space Bar to display the answers. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Practicing the Skill Analyze the following statements. Then, identify the causes and effects found in each statement. 3. Because of scarcity, people, businesses, and the government must all make trade-offs in choosing the products they want the most. cause: scarcity; effect: trade-offs 4. When a choice is made, an opportunity cost is paid. cause: making a choice effect: paying an opportunity cost Continued on next slide. Click the mouse button or press the Space Bar to display the answers. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Practicing the Skill Analyze the following statements. Then, identify the causes and effects found in each statement. 5. It is impossible for us to produce all the products we would like to have because the factors of production exist in limited quantities. cause: limited factors of production effect: impossible to produce all wanted products Continued on next slide. Click the mouse button or press the Space Bar to display the answers. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Practicing the Skill Analyze the following statements. Then, identify the causes and effects found in each statement. 6. Because consumers don’t always want the same things, items that are popular now may not sell in the future. cause: consumers’ changing wants effect: popular items may not sell in the future 7. If income increases, people can afford to buy more products. cause: income increases effect: people can buy more products Continued on next slide. Click the mouse button or press the Space Bar to display the answers. This feature is found on page 108 of your textbook.

Understanding Cause and Effect Practicing the Skill Analyze the following statements. Then, identify the causes and effects found in each statement. 8. If the price of butter goes up, more people would buy margarine instead. cause: price of butter goes up effect: demand for margarine goes up Click the mouse button or press the Space Bar to display the answers. This feature is found on page 108 of your textbook.

Wealth and Influence: Oprah Winfrey (1954–) Click the picture to learn more about Oprah Winfrey. Be prepared to answer the questions that appear on the next two slides. Continued on next slide. This feature is found on page 94 of your textbook.

Wealth and Influence: Oprah Winfrey (1954–) Drawing Conclusions Why is Oprah Winfrey considered one of the most powerful women in America? You might equate power with influence. Winfrey’s influence stems from the popularity of her television show, her wealth (and what she has done with it), and the programs in which she has participated. Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 94 of your textbook.

Wealth and Influence: Oprah Winfrey (1954–) For Further Research Make an annotated time line of Winfrey’s career, highlighting her major achievements. 1971 1973 1976 1984 1986 became newscaster at WVOL became reporter/anchor at WTVF became co-host of People Are Talking became host of AM Chicago The Oprah Winfrey Show went into national syndication Click the mouse button or press the Space Bar to display the answer. This feature is found on page 94 of your textbook.

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