E. Napp Understanding Demand Students will be able to identify characteristics of the law of demand. Students will be able to define and/ or identify the.

  • Published on
    29-Dec-2015

  • View
    214

  • Download
    0

Embed Size (px)

Transcript

  • Understanding Demand Students will be able to identify characteristics of the law of demand.

    Students will be able to define and/ or identify the following terms:Law of DemandSubstitution EffectIncome Effect

    E. Napp

  • Look at this demand curve.What happens to quantity purchasedas prices rise?

    E. Napp

  • Why do we purchase more when a saleoccurs?

    E. Napp

  • The Law of DemandThe law of demand states that consumers buy more of a good when its price decreases.

    Conversely, consumers buy less of a good when its price increases.

    Consumers love low prices.

    E. Napp

  • Its obvious, isnt it? Consumerslove low prices.

    E. Napp

  • The Substitution EffectOne reason that the law of demand exists is the substitution effect.

    The substitution effect occurs when a consumer reacts to an increase in a goods price by buying less of that good and more of a similar yet cheaper good.

    When the price of orange juice rises, consumers substitute cheaper apple juice for orange juice.

    E. Napp

  • It really depends on the price, doesnt it?

    E. Napp

  • The Income EffectThe income effect is the change in consumption resulting from a change in income.

    In other words, when prices rise, your money buys less.

    Higher prices reduce your purchasing power.

    E. Napp

  • Lower prices allow consumers toincrease demand.Lower prices increase consumerspurchasing power.

    E. Napp

  • A demand schedule records the quantitydemanded at various prices.

    E. Napp

  • A demand schedule can easily be converted to a demand curve.

    E. Napp

  • Economists love graphs because graphsprovide easy understanding of economicconcepts.

    E. Napp

  • If a picture is worth a thousand words,a graph is worth even more.

    E. Napp

  • Questions for Reflection:State the law of demand.Provide an example of the substitution effect.How does the income effect lead to the law of demand?What is a demand schedule?What is a demand curve?Why do economists love graphs?

    E. Napp

Recommended

View more >