© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4 12.1 Students understand common terms & concepts...

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4

12.1 Students understand common terms & concepts and economics reasoning.

Standard Address

1

Explain the law of demand Interpret a demand schedule and

demand curve

4.1 - Objectives


CHAPTER 4 Demand4.14.1 The Demand Curve4.24.2 Elasticity of Demand4.34.3 Changes in Demand


CHAPTER 4 Demand Why are newspapers sold in vending machines that

allow you to take more than one copy? How much do you eat when you can eat all you want? What cures spring fever? What economic principle is behind the saying, “Been

there, done that”? Why do higher cigarette taxes cut smoking by

teenagers more than by other age groups?

Consider


LESSON 4.1

The Demand Curve demand law of demand marginal utility law of diminishing marginal utility demand curve quantity demanded individual demand market demand

Key Terms


Demand

Demand indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant.


Law of Demand The relation between price and the quantity

demanded is an economic law.

The law of demand says that quantity demanded varies inversely with price, other things constant.

Thus, the higher the price, the smaller the quantity demanded.


Law of Demand

Today's topics

Demand, wants, and needs Substitution effect Income effect Diminishing marginal utility


Law of Demand

Demand, wants, and needs Consumer demand and consumer wants are

not the same thing.

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I might be willing to buy certain things…

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But, am I able to buy them?


Law of Demand Substitution effect

Remember that the change in the relative price – the price of one good relative to the prices of other goods – causes the substitution effect.

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Cereal

CONTEMPORARY ECONOMICS: LESSON 4.113


Law of Demand Income effect

Real income – that is, your income measured in terms of how many goods and services it can buy.


Law of Demand

Diminishing marginal utility The satisfaction you derive from an

additional unit of a product is called your marginal utility.

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The satisfaction you get from a second pizza is your marginal utility of that pizza


Law of Demand

Diminishing marginal utility (Continue) The Law of Diminishing marginal utility – the

more of a good a person consumes per period, the smaller the increases in total utility from consuming one more unit, other things constant.

The law of diminishing marginal utility helps explain why people buy more when the price decreases.


8 14 20 26 32Millions of pizzas per week

$15

12

9

6

3

0

Pric

e pe

r piz

zaDemand Curve for Pizza

a

b

c

d

e

D

. The schedule lists possible prices, along the quantity demanded at each price.


8 14 20 26 32Millions of pizzas per week

$15

12

9

6

3

0

Pric

e pe

r piz

zaDemand Curve for Pizza

a

b

c

d

e

D

. The demand curves slopes downward, reflecting the Law of Demand – that is, price and quantity demanded are inversely, or negatively, related, other things constant.


Demand SchedulePrice Quantity Demanded

per Pizza per Week (millions)

a $15 8b 12 14c 9 20d 6 26e 3 32


Explain the law of demand in your own words. ?

Checkpoint Pg. 105


Demand Schedule and Demand Curve When you describe demand, you must

specify the units being measured and the period being considered.


Demand Schedule and Demand Curve Demand versus quantity demanded

An individual point on the demand curve shows the quantity demanded.

Demand, is not a specific quantity, but the entire relation between price and quantity demanded.


$1284

1

(c) Chris

$1284

1 2

(b) Brianna

$1284P

rice

1 2 3 Pizzas (per week)

(a) Hector

Individual Demand for Pizzas

dH dB dC


Demand Schedule and Demand Curve Individual demand and market demand

The market demand curve shows the total quantity demanded per period by all consumers at various prices.

The market demand is simply the sum of the individual curves for all consumers in the market.


$1284P

rice

1 2 3 Pizzas (per week)

(d) Market demand for pizzas

6

Market Demand for Pizzas

dH dB dC D+ + =

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4 12.1 Students understand common terms & concepts...

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