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SECTION 1 Nature of Demand Essential Question: l Identify the two things that must SECTION 1 Nature of Demand Essential Question: l Identify the two things that must happen in order for demand to occur, explain the difference between demand quantity demanded, Explain the relationship between price and demand (LOD), Describe the information that a demand schedule/curve shows 1

SECTION 1 Nature of Demand Vs. Quantity Demanded: l Demand- exists when someone WANTS SECTION 1 Nature of Demand Vs. Quantity Demanded: l Demand- exists when someone WANTS and CAN AFFORD an item. l Quantity Demanded- refers to the specific amount of a good that demanded at each and every price. l The difference= QD is how much demand at each price; demand means at least ONE person wants/can afford 2

SECTION 1 Nature of Demand Real life Q. D. Survey: l Copy the table SECTION 1 Nature of Demand Real life Q. D. Survey: l Copy the table on the white board to the left l Record the quantity demanded for each of the prices on the chart l What do you notice happens to the Quantity Demanded each time the price increases. 3

SECTION 1 Nature of Demand Law of demand: l There is an Inverse (opposite) SECTION 1 Nature of Demand Law of demand: l There is an Inverse (opposite) relationship between PRICE and DEMAND l If Price increases, Demand decreases l If Price decreases, Demand increases 4

SECTION 1 Nature of Demand 3 economic concepts explaining Lo. D: l Income effect- SECTION 1 Nature of Demand 3 economic concepts explaining Lo. D: l Income effect- when people have more money to spend, they buy more. When they have less money to spend, they buy less. l Substitution Effect- If a cheaper alternative is available, people usually buy it! l Diminishing Marginal Utility- Even though a consumer can buy something, with each additional purchase, he/she wants it less and less. 5

SECTION 1 Nature of Demand What demand schedules and demand curves illustrate: l Demand SECTION 1 Nature of Demand What demand schedules and demand curves illustrate: l Demand schedules n Show the quantity demanded for a product at each price it is offered at shown in table form. l Demand curves: n Show the data listed in demand schedules drawn out on a graph. 6