 Goal: Demand Summary Day  Warm-up: Demand Worksheet

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  • Goal: Demand Summary Day

    Warm-up: Demand Worksheet

  • Collect Demand curves/schedulesQuiz on demand on FridayWednesday mini project

  • Definition The ability and willingness of people to buy specific quantities of a good or service at alternative prices in a given time periodThe price paid is a willing choice based upon perceived value to the buyerThe objective of the buyer is to get as much value as he can for the price paidThe Law of Demand states that generally people will buy more of a good or service at lower prices and less at higher pricesDemand Curves generally slope downward to the right

  • An inverse relationship exists between the price of a good and the quantity demanded in a given time period.Reasons:substitution effectincome effect

  • Change in quantity demanded Change in demand

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-16Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Table 1 is the Demand ScheduleFigure 1 is the Graph of the Demand ScheduleFigure 1The line is the Demand Curve

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-5Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-7Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-9Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-11Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

  • Table 1Price QD$500 1,000 450 3,000 400 7,000 350 12,000 300 19,000 250 30,000 200 45,000 150 57,000 100 67,000 3-17Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 1Price and Quantity Demanded are inversely relatedQuantity Demanded is a point on the Demand Curve

  • Tastes and Preferences The consumers desire for various goods and servicesIncome The higher it is, the more we consumeOther Goods Availability and PriceExpectations for income; for price changes; for new products; etcNumber of Buyers The more; bigger demand; greater demand

  • Effect of fads:

  • An increase in the number of buyers results in an increase in demand.

  • A higher expected future price will increase current demand.A lower expected future price will decrease current demand.A higher expected future income will increase the demand for all normal goods.A lower expected future income will reduce the demand for all normal goods.

  • Complement Products are two or more products that are generally consumed, or used, togetherHot dogs and MustardPeanut Butter and JellyIf price of the primary good, say hot dogs, increases, the quantity demanded (Qd) of that good will decrease, andA decrease in the Qd for hot dogs will reduce the demand for mustard, and ultimately the price of mustard will fallSo, the prices of complementary goods are said to be inversely related

  • Substitute Products are two or more products where one product may be substituted for anotherPepsi Cola or Coca ColaCanned tuna fish or canned chicken If the price of Pepsi increases, the quantity demanded (Qd) will decline, andThe decrease in (Qd) for Pepsi will lead to an increase in the demand for Coca Cola which will lead to an increase in the price of Coca Cola, So the prices of substitute products are said to be directly related

  • Price of coffee rises:

  • INELASTIC CHANGE IN PRICE = NO CHANGE IN DEMANDELASTIC CHANGE IN PRICE =MAJOR ADJUSTMENT IN DEMANDIs it a necessity?Are there a low numbers of substitutes?Is it relatively cheap?

    3 Yes?

    Example: pacemakers

    Is it a necessity?Are there a few number of substitutes?Is it expensive?3 Nos?

    Examples: pizza

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