Bellringer—Each partner pair should retrieve the following from the back of the room. You have one minute after the bell rings to be in your seat with the materials.

1 small whiteboard1 black dry erase marker1 color (other than black) dry erase markerSock eraser

Put these under your desk.

Friday, August 23, 2013

What is the difference between a change in demand and a change in quantity demanded? Be able to graphically apply the determinants of demand.

Agenda1.Demonstration2.Lecture3.Whiteboard Practice Problems4.Group Project

1. Desire to own2. Ability and willingness to pay

Defining Demand

Law of Demand—As prices decrease, the QUANTITY demanded

INCREASES As prices increase, the QUANTITY demanded

DECREASES

DemandP

rice s

QD

Pri

ce s QD

Demand Schedule—a table that lists the various quantities demanders will purchase at various prices.

Demand Curve—schedule in graph formIndividual—one person’s demand for a

productMarket—a group’s demand for a product

Tools to show demand

Price Quantity

$2.00 0

$1.50 1

$1.00 2

$0.50 3

.50

1.00

1.50

2.00

1 2 3 4

Pric

e

Quantity

Demand for Pizza

Quantity Demanded—ONE quantity at ONE priceDemand—List of quantities at different prices

illustrated by a demand schedule and a demand curve.

Difference between QD and D

Demand Schedules

Individual Demand Schedule

Price of a slice of pizza

Quantity demanded per day

$.50$1.00$1.50$2.00$2.50$3.00

543210

Market Demand Schedule

Price of a slice of pizza

Quantity demanded per day

$.50$1.00$1.50$2.00$2.50$3.00

30025020015010050

Difference between QD and D

Market Demand Curve

3.00

2.50

2.00

1.50

1.00

.50

0

0 50 100 150 200 250 300 350Slices of pizza per day

Pri

ce p

er

slic

e (

in

doll

ars

)

Demand

Change in QUANTITY demanded Movement along the demand curveCaused by a change in the PRICE of the

productChange in DEMAND

Shift of the entire curveCaused by one of the determinants of demand

Difference between QD and D

Factors that shift the demand curveTaste and PreferencesRelated goods—prices of substitutes and

complementsIncomeBuyers—Number of buyersExpectations—CONSUMER expectations

Demand Determinants

Shifts the curve LEFT or RIGHT

NOT up or downIf demand

INCREASES, the demand curve shifts to the RIGHT

If demand DECREASES, the demand curve shifts to the LEFT

Change in Demand

6

5

4

3

2

1

0

Quantity Demanded (bushels per week)

Pri

ce (

per

bu

shel)

P

Q

D1

2 4 6 8 10 12 14 16 18

Increase in Demand

Decrease in Demand

D2

D3

Taste and Preference

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones

0

Decreasein demand

A popular new diet forbids dairy

D1D2

Substitutes

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones

0

Decreasein demand

The price of frozen yogurt drops

D1D2

Complements

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream

Quantity of Ice-Cream

0

Increasein demand

D1D2

The price of cake drops

Consumer IncomeNormal Good (demand ________ when income increases)

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones

0

Increasein demand

An increase

in income...

D1D2

Exception to Consumer IncomeInferior good: demand decreases when

income increases.

P

Mrs. Powell’s demand for Wal-mart brand ice cream decreases after she receives a $10,000 pay increase

D1D2

Q

Number of Buyers

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones

0

Increasein demand

MTSU increases attendanc

e by 10,000

D1D2

Expectations

$3.002.50

2.001.501.00

0.50

21 3 4 5 6 7 8 9 10 1211

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones

0

Decreasein demand

Ben & Jerry’s offers a FREE ice cream cone on Sunday. This is the demand curve for FRIDAY.

D1D2

What is the difference between a change in QUANTITY demanded and a change in DEMAND?

Answer EQ

Draw a demand and supply graph in black (brown).

Title it “Beef Consumption in May.” You do not need numbers on the graph.

Practice Problems

Pop Quiz—

(Points 1-3) Draw a demand and supply graph for Beef Consumption in MAY. Point 1. Axes are labeled correctly and original D curve is in the correct shape. ONE will be a no shift.

4. Price of beef expected to rise in June.

5. Millions of immigrants swell the US population

6. Pork prices drop

7. Mad Cow disease comes to the US

8. Beef prices fall. Consumers buy more.

9. Real income for US drops for 3rd month

10. Charcoal prices go up (You will only eat burgers the right way—on a charcoal fired grill!!!)

11. When demand increases, what happens to the equilibrium price and equilibrium quantity.

12. When demand decreases, what happens to the EP and EQ?

13. Explain the difference b/wn a shift in the demand curve and a movement along the demand curve. In other words, what causes each?

Group PracticeDraw a demand and supply graph for a

product in one color. Show an increase and a decrease in demand

in different colors. Write out 6 scenarios. One for each

determinant and one that doesn’t change demand. You may write it on the poster or on your own notebook paper. DON’T write down the ANSWER on the poster.

1-2 people in charge of drawing/writing. 2-3 people in charge of scenarios.

“Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely, and using terms as they are defined by economists, choose the statement that best describes this quotation.

(A) The quotation is correct: An increase in price always causes a decrease in demand.

(B) The quotation is incorrect: An increase in price always causes an increase in demand, not a decrease in demand.

(C) The quotation is incorrect: An increase in price causes a decrease in the quantity demanded, not a decrease in demand.

(D) The quotation is incorrect: An increase in price causes an increase in the quantity demanded, not a decrease in demand.

Other things constant, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds?

(A) A decrease in consumer incomes(B) A decrease in the price of mopeds(C) An increase in the price of bicycles(D) An increase in people’s tastes and

preferences for mopeds

“As the price of domestic automobiles has inched upward, customers have found foreign autos to be a better bargain. Consequently, domestic auto sales have been decreasing, and foreign auto sales have been increasing.” Using only the information in this quotation and assuming everything else constant, which of the following best describes this statement?

(A) A shift in the demand curves for both domestic and foreign automobiles

(B) A movement along the demand curves for both foreign and domestic automobiles

(C) A movement along the demand curve for domestic autos, and a shift in the demand curve for foreign autos

(D) A shift in the demand curve for domestic autos, and a movement along the demand curve for foreign autos

Which of the following would increase demand for a normal good? A decrease in:

a. Priceb. Incomec. The price of a substituted. Consumer taste for a good. e. The price of a complement

A decrease in the price of butter would most likely decrease the demand for

A. margarineB. BagelsC. Jelly D. Milk E. Syrup

Card #3 DemandDraw a demand and supply graph for a

product. Show an increase in demand in one color and

a decrease in demand in another color. State which color is which out to the side.

Give an example of what would cause the increase and what would cause the decrease.

List and briefly explain the 5 determinants of demand.

State the difference b/wn a change in demand and QD.

Due Tuesday, but not really…not taking up until we do Supply on the back.