DemandDemand

ES: Make decisions after reflection and reviewES: Make decisions after reflection and review

Where do prices come from?Where do prices come from? In a market economy prices are set by In a market economy prices are set by

DEMAND and SUPPLY. These are DEMAND and SUPPLY. These are determined by two groups:determined by two groups:

ConsumersConsumers: the people who BUY : the people who BUY goods and servicesgoods and services

ProducersProducers – the people that provide – the people that provide goods and servicesgoods and services

Demand – HW ReviewDemand – HW ReviewDemand:Demand: The amount of a good or service that The amount of a good or service that

people are willing and able to buy at various people are willing and able to buy at various prices during a given time period. prices during a given time period.

Amount:Amount:

Willing to buy:Willing to buy:

Able to buyAble to buy

Price: Price:

Demand ScheduleDemand Schedule: The list of the quantities of a good that one : The list of the quantities of a good that one person will buy at various prices. person will buy at various prices.

Tyler’s Taco Demand ScheduleTyler’s Taco Demand Schedule

PricePrice QuantityQuantity .50.50 11111.001.00 9 91.501.50 7 72.002.00 5 52.502.50 3 33.003.00 1 1

Tyler’s Taco Demand Tyler’s Taco Demand CurveCurve

Quantity

Price

Demand CurveDemand Curve: The relationship between the PRICE of : The relationship between the PRICE of a good and the QUANTITY buyers are willing and able a good and the QUANTITY buyers are willing and able

to buyto buy

Demand Shifters in the MarketDemand Shifters in the Market

IncomeIncome – recession will decrease demand – recession will decrease demand

The number of consumersThe number of consumers – seasonal – seasonal

Consumers tastes and preferencesConsumers tastes and preferences – they – they change. Example: Sushichange. Example: Sushi

The price of substitute goodsThe price of substitute goods – burritos v. – burritos v. tacostacos

Law of DemandLaw of Demand: As PRICE increases, QUANTITY : As PRICE increases, QUANTITY demanded decreases – and vice versa.demanded decreases – and vice versa.