Post on 15-Jan-2016
Supply &
DemandUnit 1
iPhone 6
Price Quantity
$600$300$100
MilkPrice Quantity$2.00$4.00$6.00$8.00
$10.00
What is Market
Research?
The Big Bang Theory 5x05 - The Sword - YouTube
PRICEA neutral source on information
Allows for change in the economy
It allows freedom of choice
DEMAND
DemandDemand is the desire to have some
good or service and the ability to pay for it.
The law of demand states that when the PRICE of a good or service GOES DOWN, consumers buy MORE, meaning demand increases.
If price goes UP, demand should DECREASE.
Demand Curve
Pt.Price
of DVDs
Quantity Demande
d
A $30 0
B $25 1
C $20 2
D $15 3
E $10 4
F $5 50
Quantity
Price
1 2 4 53
5
15
20
10
25
30
A
B
C
D
E
F
DEM
AND CU
RVE
Movers vs. Shifters
Movement on the CurveChange in quantity demanded is a
change in PRICE or QUANTIY.
This will cause you to move along the curve, up/down.
We call these “movers”
Quantity
Price
A
B
C
D
E
F
Change in Quantity Demand
Moves along the curve
Demand ChangesChange in demand meanwhile is a
change in the AMOUNT YOU BUY.
This means the curve will shift to the left or to the right.
We call these “shifters”
There are six factors that influence this.
Quantity
Price
A
B
C
D
E
F
Change in Demand
B
C
D
E
F
A
Shifts left or right
6 Factors for
Change in Demand
SubstitutesSubstitutes are goods/services
that can be used in place of another good or service.
If the price of a substitute changes, people may be more/less inclined to get the original item.
Examples Pepsi or Coca Cola
Ordering Pizza or Chinese for dinner
P
Q
P
Q
Substitute’s price goes up ie. Coke
Substitute’s price goes down
PepsiPepsi
Complements
Complements are goods that are used together, so that a rise in demand in one good will increase the demand for the other good.
If a price change occurs for the complement, it will affect the demand for
the original item.
P
Q
P
Q
Complement’s price goes up
Complement’s price goes down
Cereal
Cereal
Income
People’s ability to buy certain goods is affected by their income.
If their income changes, then their ability to buy certain goods will change.
Less money means the curve will shift left, more money will shift the curve to the right.
.
P
Q
P
Q
Recession hits: Lower Incomes
Economic Growth: Higher Incomes
Dr. Pepper Dr.
Pepper
Consumer TastesPeople’s tastes are constantly changing!
Advertising influences people’s tastes.
http://www.youtube.com/watch?v=R55e-uHQna0
TermsNormal Goods – goods consumers
demand more of when their income rises.
Inferior Goods – goods that consumers demand more of when their income falls.
P
Q
P
Q
Recession hits: Generic brand goods
Economic Growth: Generic brand goods
Tops gummy bears
Tops gummy bears
Consumer Expectations If you expect a product to go
on sale, you wait to buy that product
Examples Cars
Gas
Tickle-Me-Elmo
Smart Phones
P
Q
P
Q
Consumers expect price to rise
Consumers expect price to fall
IPhone
IPhone
Market SizeThe size of the market is based
on the number of consumers.
Example People leaving Buffalo has caused a smaller
market size.
More people moving to Florida and Texas has created larger market sizes in these states.
If people leave a region, the market size will decrease meaning the curve will shift to the
left and vice versa.
P
Q
P
Q
Bigger Population Smaller Population
http://www.youtube.com/watch?v=8E0SoagJCx4
Elasticity of DemandElasticity of demand is how responsive
consumers are to price changes.
Elastic demand – quantity demanded will change greatly as price changes.
Elastic Demand
0Quantity
Price
1 2 4 53
5
15
20
10
25
30
A
BC
DE
F
DEMAND CURVE
When demand is elastic, prices will not change much, but quantity demanded will change.
Inelastic Demand
0Quantity
Price
10
20
40
50
30
5
15
20
10
25
30
A
B
C
D
E
F
DEM
AN
D C
UR
VE
Inelastic demand states that quantity demanded will change little as price changes.
Fact
ors
that
Dete
rmin
e E
last
icit
y
Is it a necessity or a luxury?
Luxury = elastic Necessity = inelastic
Are there good substitutes?Yes = Elastic No =
Inelastic
What proportion of income does it use?Large = Elastic Small =
Inelastic