Q. O. D-Surround yourself with people who believe you can. Bellwork Why are newspapers sold in vending machines that allow you to take more than one copy? How much do you eat when you can eat all you want? Do higher cigarette taxes cut smoking by teens more than by other age groups? 1
The Economics of Demand Essential Question: What factors affect demand? Assignment Ch 4 Key Terms 2
Objectives The Demand Curve Explain the law of demand Interpret a demand schedule and demand curve 3 Essential Question: What factors affect demand?
Key Terms The Demand Curve 4 demand law of demand marginal utility law of diminishing marginal utility demand curve quantity demanded individual demand market demand Essential Question: What factors affect demand?
What is Demand? Demand is the different quantities of goods that consumers are willing and able to buy at different prices. (Ex: Bill Gates is able to purchase a Ferrari, but if he isn’t willing he has NO demand for one) Essential Question: What factors affect demand? 5
Law of Demand The law of demand says that quantity demanded varies inversely with price, other things constant. Thus, the higher the price, the smaller the quantity demanded. 6 Essential Question: What factors affect demand?
LAW OF DEMAND As Price Falls… …Quantity Demanded Rises As Price Rises… …Quantity Demanded Falls Price Essential Question: What factors affect demand? Quantity Demanded 7
Law of Demand, wants, and needs Substitution effect The change in the relative price (the price of one good relative to the prices of other goods) causes the substitution effect If all prices changed by same margin, there would be no substitution effect Income effect Money income – the number of dollars you receive period Real income – measure in terms of how many goods and services you can buy Diminishing marginal utility Marginal utility – additional satisfaction you derive from each item Law of marginal utility –Satisfaction you derive from each additional item consumed decreases as your consumption increases (example: pizza slices) 8 Essential Question: What factors affect demand?
Demand Schedule and Demand Curve Demand versus quantity demanded Individual demand Market demand 9 Essential Question: What factors affect demand?
Demand Schedule Price Quantity Demanded per Pizza per Week (millions) a b c d e 10 $15 12 9 6 3 Essential Question: What factors affect demand? 8 14 20 26 32
Demand Curve for Pizza Price per pizza $15 12 9 6 b c d e 3 0 11 a D 8 14 20 26 32 Millions of pizzas per week Essential Question: What factors affect demand?
Individual Demand for Pizzas (a) Hector (b) Brianna (c) Chris $12 8 4 8 4 Price $12 d. H 1 2 3 12 1 2 Pizzas (per week) Essential Question: What factors affect demand? d. B d. C 1
Market Demand for Pizzas (d) Market demand for pizzas d. H + d. B + d. C = D Price $12 8 4 1 2 3 13 6 Pizzas (per week) Essential Question: What factors affect demand?
Other Determinants of Demand Consumer Income The prices of related goods The number and composition of consumers Consumer expectations Consumer tastes 14 Essential Question: What factors affect demand?
Changes in Consumer Income If income ↑, consumers willing and able to buy more which ↑ demand Demand curve shifts to the right Two categories of goods: Normal goods – demand increases as money income increases Inferior goods – demand decreases as money income increases Examples: used clothing, bus rides, etc. 15 Essential Question: What factors affect demand?
Changes in the Prices of Related Goods Substitutes Decrease in price of one item will reduce the demand for a substitute Example: Tacos and Pizza Complements Certain goods used together Example: airline tickets and car rentals A decrease in the price of one shifts the demand of the other rightward 16 Essential Question: What factors affect demand?
Extensions of Demand Analysis Role of time Your willingness to pay more for timesaving goods depends on the opportunity cost of your time! 17 Essential Question: What factors affect demand?
Скачать презентацию Q O D-Surround yourself with people who believe
17a2795e61f9886a3d5a88cb8d7d1c98.ppt