DEMAND
description
Transcript of DEMAND
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DEMAND
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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.
The Big Bang Theory 5x05 - The Sword - YouTube
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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
DEMAND CURVE
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Other TermsDue to the law of diminishing
marginal utility, people will only buy additional goods at a given time if price declines.
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Other TermsThe Income Effect – the change in the
amount a consumer will buy because their purchasing power of their income changes.
The Substitution Effect – a change in the amount that consumers will buy because they will buy substitute goods instead.
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Changes in DemandChange in Quantity Demanded is an
INCREASE or DECREASE in the amount demanded because of a change in PRICE.
Change in Demand is when something prompts consumers to buy DIFFFERENT AMOUNTS of a good at every price.
My Life as a Mighty Mito Mamma: Crashes and Supply and Demand
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Quantity
Price
A
B
C
D
E
F
Change in Quantity Demand
Moves along the curve
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Quantity
Price
A
B
C
D
E
F
Change in DemandB
C
D
E
F
A
Shifts left or right
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Terms Individual Demand Curve – the demand
for an individual in a specific market.Market Demand Curve – the total
demands of all individuals in a given market.These numbers should be bigger.
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TermsNormal Goods – goods consumers
demand more of when their income rises.
Inferior Goods – goods that consumers demand more of when their income falls.
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Demand ChangesChange in quantity demanded is a
change in PRICE or QUANTIY. This will cause you to move along the curve, up/down.
Change in demand meanwhile is a change in the AMOUNT YOU BUY. This means the curve will shift to the left or to the right. There are six factors that influence this.
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6 Factors for
Change in Demand
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ComplementsComplements 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.
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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
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Consumer Expectations If people believe that the
price of a good or service will change in the future, that may impact their decision to buy then or now.
Examples Cars Gas Tickle-Me-Elmo
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Consumer TastesPeople’s tastes change overtime!When goods are more popular,
people demand more of it.When goods loose popularity, people
have less demand for it.Advertising influences
people’s tastes.
http://www.youtube.com/watch?v=R55e-uHQna0
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Market SizeThe size of the market is based
on the number of consumers. If people leave a region, the
market size will decrease meaning the curve will shift to the left and vice versa.
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.
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IncomePeople’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.
More money you can buy _________ goods.
Less money you will buy __________ goods.
NORMALINFERIOR
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Elasticity of DemandElasticity of demand is how responsive
consumers are to price changes.Elastic demand – quantity demanded
will change greatly as price changes. Inelastic demand – quantity demanded
will change little as price changes.
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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.
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Inelastic Demand
0Quantity
Price
10
20
40
50
30
5
15
20
10
25
30
A
B
C
D
E
F
DEMAND CURVE
When demand is in elastic, prices will change a lot, but quantity demanded will not change much.
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Factors of ElasticityFactors of elasticity are…1. Substitutes of Goods or Services
Goods/services with few/no substitutes are inelastic as you have to pay regardless to get that item.
The more substitutes, the more elastic demand is.2. Proportion of Income3. Necessity or Luxury
Needs are inelastic; you’ll typically pay higher prices to satisfy these, but luxuries are elastic.