what would happen to the price of this worm, if millions ... · demand shift •shifters of demand...
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Do Now• This stuffed worm is so cute! Everybody wants one!
• What would happen to the price of this worm, if millions of Americans started to buy it?
• EXPLAIN!
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Demand
Note Questions
What is the relationship between the price of an item and quantity demanded?
What causes demand to shift?
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What is the relationship between the price of an item and quantity demanded?
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Demand• The different quantities
of goods and services that consumers are willing and able to buy at different prices.
• Demand is determined by consumers wants & needs
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Law of Demand
There is an inverse relationship between price and quantity demanded
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Demand Curve
• Graphical representation of a product or service and the quantity wanted at a given price
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Drawing a Demand Curve
• Things you must draw and label• The graph
• Label axes – price & quantity (be specific to the price of what and quantity of what)
• The demand curve should be labeled as (D1)
• On the next slide you will be drawing a demand curve in your notes it is important to make sure to label all parts
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Practice
• You are provided with the following data for the demand for gasoline.
• Draw and label a demand curve using the data.
Price Quantity
5.00 0
4.50 40
4.00 50
3.500 60
3.00 70
2.50 80
2.00 90
0 100
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Should Look Like This
• When prices rise or fall, the quantity (amount) demanded also changes.• Causes movement along
the demand curve• Called a change in quantity
(amount) demanded
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What causes demand to shift?
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Demand Shift
• All factors other than price can cause a demand shift• Shifters of demand can
cause demand curve to increase or decrease
• When demand increases – curve moves to the right
• When demand decreases – curve moves to the left
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Substitutes and Complements
•2 goods can affect each other’s demands• Complements:
• 2 goods bought/used together
• Substitutes• Goods used in place
of each other
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Substitutes or Complements ?
• Car and Gas
• Peanut Butter and Jelly
• Coke and Pepsi
• Syrup and Waffles
• White Bread and Whole Grain Bread
• Coffee and Tea
• Needle and Thread
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Elasticity of Demand • Way consumers respond to price changes
• Inelastic – demand for good remains constant even if price increases, usually a need• Medicine
• Elastic – demand for good decreases when there is even a small price increase, usually a want • Food choices
• Depends on if there are substitutes available
• Necessities vs. Luxuries
• Can change over time
• Will vary based on the individual
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Elastic or Inelastic?
• Gasoline ELASTIC | INELASTIC• Toilet Paper ELASTIC | INELASTIC• Cable ELASTIC | INELASTIC• Electricity ELASTIC | INELASTIC• Cell Phones ELASTIC | INELASTIC• Taco Bell ELASTIC | INELASTIC
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Demand Shifters – non-price related changes in demand
• Tastes and Preferences• What you like?
• Number of Consumers• How many people want it b/c there are more people?
• Price of Related Goods• How much does a substitute cost?
• Disposable Income• How much extra money you have after paying taxes?
• Future Expectations• Is it going to go away or on sale?
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Example #1
• Tesla truck failed to demonstrate unbreakable windows
• Will this increase or decrease demand for tesla trucks?• How will this affect the demand
curve? (left or right)
• What caused this increase or decrease (shift) in demand?
Answers:- Decrease- Left- Taste and Preferences
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Example #2
• Kathryn got a management position at work
• Will this increase or decrease demand for luxury items?• How will this affect the demand
curve? (left or right)
• What caused this increase or decrease (shift) in demand?
Answers:- Increase- Right- Disposable Income
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Example #3
• Kelly had 2 babies.
• Will this increase or decrease demand for kids meals at McDonald’s?• How will this affect the demand
curve? (left or right)
• What caused this increase or decrease (shift) in demand?
Answers:- Increase- Right- Number of Consumers