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CONTEMPORARY ECONOMICS: LESSON 4.13 CHAPTER 4 Demand The Demand Curve Elasticity of Demand Changes in Demand
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4
12.1 Students understand common terms & concepts and economics reasoning.
Standard Address
1
Explain the law of demand Interpret a demand schedule and
demand curve
4.1 - Objectives
© SOUTH-WESTERN
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.13
CHAPTER 4 Demand4.14.1 The Demand Curve4.24.2 Elasticity of Demand4.34.3 Changes in Demand
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.14
CHAPTER 4 Demand 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? What cures spring fever? What economic principle is behind the saying, “Been
there, done that”? Why do higher cigarette taxes cut smoking by
teenagers more than by other age groups?
Consider
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.15
LESSON 4.1
The Demand Curve demand law of demand marginal utility law of diminishing marginal utility demand curve quantity demanded individual demand market demand
Key Terms
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.16
Demand
Demand indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.17
Law of Demand The relation between price and the quantity
demanded is an economic law.
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.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.18
Law of Demand
Today's topics
Demand, wants, and needs Substitution effect Income effect Diminishing marginal utility
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.19
Law of Demand
Demand, wants, and needs Consumer demand and consumer wants are
not the same thing.
© SOUTH-WESTERN
I might be willing to buy certain things…
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But, am I able to buy them?
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.112
Law of Demand Substitution effect
Remember that the change in the relative price – the price of one good relative to the prices of other goods – causes the substitution effect.
© SOUTH-WESTERN
Cereal
CONTEMPORARY ECONOMICS: LESSON 4.113
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.114
Law of Demand Income effect
Real income – that is, your income measured in terms of how many goods and services it can buy.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.115
Law of Demand
Diminishing marginal utility The satisfaction you derive from an
additional unit of a product is called your marginal utility.
© SOUTH-WESTERN
The satisfaction you get from a second pizza is your marginal utility of that pizza
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.117
Law of Demand
Diminishing marginal utility (Continue) The Law of Diminishing marginal utility – the
more of a good a person consumes per period, the smaller the increases in total utility from consuming one more unit, other things constant.
The law of diminishing marginal utility helps explain why people buy more when the price decreases.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.118
8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pric
e pe
r piz
zaDemand Curve for Pizza
a
b
c
d
e
D
. The schedule lists possible prices, along the quantity demanded at each price.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.119
8 14 20 26 32Millions of pizzas per week
$15
12
9
6
3
0
Pric
e pe
r piz
zaDemand Curve for Pizza
a
b
c
d
e
D
. The demand curves slopes downward, reflecting the Law of Demand – that is, price and quantity demanded are inversely, or negatively, related, other things constant.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.120
Demand SchedulePrice Quantity Demanded
per Pizza per Week (millions)
a $15 8b 12 14c 9 20d 6 26e 3 32
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.121
Explain the law of demand in your own words. ?
Checkpoint Pg. 105
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.122
Demand Schedule and Demand Curve When you describe demand, you must
specify the units being measured and the period being considered.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.123
Demand Schedule and Demand Curve Demand versus quantity demanded
An individual point on the demand curve shows the quantity demanded.
Demand, is not a specific quantity, but the entire relation between price and quantity demanded.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.124
$1284
1
(c) Chris
$1284
1 2
(b) Brianna
$1284P
rice
1 2 3 Pizzas (per week)
(a) Hector
Individual Demand for Pizzas
dH dB dC
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.125
Demand Schedule and Demand Curve Individual demand and market demand
The market demand curve shows the total quantity demanded per period by all consumers at various prices.
The market demand is simply the sum of the individual curves for all consumers in the market.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.126
$1284P
rice
1 2 3 Pizzas (per week)
(d) Market demand for pizzas
6
Market Demand for Pizzas
dH dB dC D+ + =
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