Demand Marginal Utility Economics Mr. Biddle
Demand Marginal Utility • Utility- The capacity to be useful and provide satisfaction – Pertains to a product or service • The Utility of a good or service may vary from person to person – Ex- Diet Mt. Dew
Demand Marginal Utility • Marginal Utility- The extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product • Buying a new one after the first • The more we use a product we experience diminishing marginal Utility
Diminishing Marginal Utility • The extra satisfaction we get from using additional quantities of product begins to diminish or fade • B/c of DMU people are not willing to pay as much money for a second, third, or fourth product • When you reach the point where the marginal utility is less than the price, you stop buying it
Factors Affecting Demand • Sometimes things happen to change peoples willingness and ability to buy • When this happens you experience Change in Quantity Demanded – Change in Price would be an obvious one
The Income Effect • The change in quantity demanded, b/c of a change in price that alters consumers’ real income • Ex- If you went to the store thinking you were going to buy 6 CD’s for $90, but when you got there it only cost you $60. As a result, you feel $30 richer and may be willing to buy more. (or viceversa) • The income you have after you pay all expenses
The Substitute Effect “Fly High Free Bird” • The Change in quantity demanded, because of the change in the relative price of the product (How it relates to other products) • This is when you buy cheaper goods to replace more expensive goods or services demanded • Ex- buying a CD instead of going to a concert
Change in Demand • Sometimes things happen to make people willing to buy different amounts of a product at the same price – – Income Tastes (fads) Price of other goods Number of consumers in the market – Change in expectations
Consumer Income • When a person makes more money they are willing to spend more • When they make less they aren’t willing to spend as much
Consumer Tastes (Preferences) • Consumers don’t always want the same things they have wanted in the past • This can be effected by Advertising, fads, new products, the season, and so on • Also, consumers can simply get tired of a product
The Price of Other Goods • A change in the price of related products can cause a change in Demand • Substitutes- a product that can be used in the place of another product – Ex- Butter & Margarine – If the price of one goes up, the demand of the other would go up as well
The Price of Other Goods • Complements- products that are used with other products • When one product increases in demand so does the other one • Ex- Gillette razor handles and blades • Ex- Cake Mix and Icing
Change in Expectations • Influences buying behavior based on the way people think about the future • Bad weather reports makes people stock up on food, road salt, etc. • If someone announced that in a year there will be a new way to listen to music on a smaller disk, people might stop buying CD/s now Patriots fans wouldn’t have bought so much memorabilia if they would have known this was going to happen! 18 -1* * Spygate
Number of Consumers • The bigger the market is the more people there is to buy products, which means a higher demand. • Or vise versa
Reading Groups 2 nd Period Group 1 TJ Justus Will Redden Kendal Sandy Lisanne Gregory Group 2 Dominic Belew Patrick Mc. Cain Cheyenne Egbring Gabby Baker Jonah Smith Group 4 Hunter Lea Brooklyn Trent Mason Taylor Group 3 Samantha Glass Dylan Reynolds Sabrina Sebastian Austin Sikles Jozi Steffen Group 5 Tanner Mains Cody Wilson Chris Collins Crystal Shepperd Thomas Hutchinson Lewis Farrell Jordan Dennie
Reading Groups 4 th Period Group 1 Michael Webster Madison Dotson Group 3 Josh Brown Montgomery Franx Tanya Edwards Tara Fryman Micheala Pittman Group 2 Jeff Browning Robert Hall Hunter Cookendorfer Britney Zachary Tristen Knox Jody Acton Sarah Tackett Group 4 Mc. Kenzie Florence Catlyne Nuckels Jay Heath Kallie Bickel Jacob Koettel Group 5 Ronald Brock Joe Johnson Nelson Parks Kayla Gabbard Maraya Letner
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