nature of demand
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Nature of Demand
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Learning Objectives: Understand key economic terms related
to demand Learn to create/interpret demand
schedules and demand curves
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Demand The amount of a good
that consumers are willing and able to buy at a given point in time.
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Law of Demand: Increase in good’s price cause a
decrease in quantity demanded. Decrease in price causes increase in quantity demanded.
Price is the main variable affecting demand, so…
Price = DemandPrice = Demand
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Income Effect Purchasing power:
amount of goods/services one can buy with a set amount of $$
Income effort: Change in purchasing
power due to change in price
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Substitution Effect Consumers tend to choose the lower-
priced product if similar
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Diminishing Marginal Utility
Marginal Additional/more
Utility Amount of satisfaction you get from
consuming a product
As more units are consumed, the satisfaction you get from each additional one decreases
*demand has a limit!
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Market price:$4,500
New item*
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Date of Purchase
Price per TV (in dollars)
Today $4,500
April 2013 $3,500
Half-yearly sale $3,000
4th of July sale $2,000
Labor Day sale $1,500
Black Friday $900
When will you buy the TV?