Home Documents 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. 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.
Embed Size (px)
344 x 292 429 x 357 514 x 422 599 x 487
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
Look at this demand curve.What happens to quantity purchasedas prices rise?
Why do we purchase more when a saleoccurs?
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.
Its obvious, isnt it? Consumerslove low prices.
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.
It really depends on the price, doesnt it?
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.
Lower prices allow consumers toincrease demand.Lower prices increase consumerspurchasing power.
A demand schedule records the quantitydemanded at various prices.
A demand schedule can easily be converted to a demand curve.
Economists love graphs because graphsprovide easy understanding of economicconcepts.
If a picture is worth a thousand words,a graph is worth even more.
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?