Intro to DemandUnit 4: Chapter 4

Economics

The Law of Demand

As price increases ↑ :

the quantity demanded decreases ↓

● As price decreases ↓ :

the quantity demanded increases ↑

Why does the law of Demand

work? 2 factors…

USUALLY…

If price goes up, you can’t afford to buy as much quantity for the same amount of money.

If the price goes up, you buy an alternative (and less quantity of the original good).

Market Demand Schedule

Willingness to demand (or buy) a good/service at ALL given prices.

Your graph above is a Market Demand Schedule Graph

Market Demand Schedule

Individual demand schedules get combined into a

market demand schedule.

● Simply a column list of how much quantity a

set of consumers demand at each price.

Change in Quantity Demanded: Just a Move Along the Demand Curve

Movement is based on the Law of

Demand: as price changes,

Quantity

Demanded

changes.

At a price of $1.50, what is the total

quantity of gizmos that this market

demands?

CHANGE in Demand:

SHIFT IN THE ENTIRE LINE

Now, at the SAME Price ALL

The sudden you want MORE

or LESS.

Let’s try and see if it works

with our class example.

(Cookies)

What Shifts Demand:

1. Consumer Income

Increase income – people buy more;

decrease income – people buy less.

Example: I get a raise so I buy that new car I’ve

been needing!

Example: Class Student hits lottery, buys more

cookies

Demand curve shifts – right if increase and left if

decrease

2. Substitutes

Concerns related/similar product that will be used in

place of another product

Example: buy margarine if price of butter goes up

Note: result is Change in Demand for the substitute

Margarine. Is change in quantity demanded for

original/Butter due to its price changing

THINK:

If Coke prices went up drastically, what would

happen to the Demand of Faygo cola?

3. Expectations (Future)

The way people think about the future –

positive or pessimistic.

Example: Clothing store advertises BIG SALE

NEXT WEEK.

Ex: news of more layoffs, people hold back on

big purchases, luxury items…

Ex: forecast snow storm/snow day and moms

run up to buy milk and rent videos for the kids

4. Consumer Tastes

Change mind of product due to ads, celebrity,

fashion trends/ gets ‘old’, seasonal tastes, hear

something good/ bad about product re: health,

environment…

Example: news story report: health risks of

product

Example: media blitz for

Iphone 6, Iwatch

5. Compliments

Other related goods sold along with a product

Example: when Turkey goes on sale (see change

in quantity demanded for the Turkey) see

Change in Demand for gravy, stuffing,

potatoes…

Example: Demand of Hotdogs if the price of

hotdog buns TRIPLES!

Peanut butter & Jelly

6. Number of Consumers

(Market Size)

Increase in the number of people

with demand for goods/services

Example: population increase due

to immigration

Example: new market opens up –like

China! Huge increase in number of

consumers!