DEMAND

CHAPTER 20, SECTIONS 1 & 2

WHAT IS DEMAND?

• Demand – the desire, willingness and ability to buy a good or service

• Demand Schedule – a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices

• Demand Curve – a graph that shows the amount of product that would be bought at all possible market prices

WHAT IS DEMAND?

• Law of Demand – quantity demanded and price move in OPPOSITE directions

• Market Demand – the total demand of all consumers for their product or service

DEMAND ILLUSTRATED

DIMINISHING MARGINAL UTILITY

• Diminishing Marginal Utility – the principle that our additional satisfaction (marginal utility) tends to go down as more and more units are consumed

CHANGES IN DEMAND

• Changes in the number of consumers

CHANGES IN DEMAND

• Changes in consumers’ income

CHANGES IN DEMAND

• Changes in consumers’ tastes

CHANGES IN DEMAND

• Changes in consumers’ expectations

CHANGES IN DEMAND

• Changes in substitutes – competing products that can be used in place of one another

CHANGES IN DEMAND

• Changes in complements – products that are used together

CHANGES IN DEMAND

• Shift (increase) in demand for Oreo Cookies

ELASTICITY OF DEMAND

• Demand elasticity – the extent to which a change in price causes a change in the quantity demanded

DEMAND ELASTIC

• Products are usually demand ELASTIC when there are numerous, competitive substitutes

DEMAND INELASTIC

• Price changes have very little effect on products that are demand INELASTIC (few or no substitutes)