DEMANDOr…My Pet Rock Died.

WHAT IS “DEMAND”?

• Demand : the desire to have some good or service and the ability to pay for it.• It isn’t enough for

consumers to desire a good, if they cannot afford it.

• It isn’t enough for consumers to be able to afford a good, if they don’t really desire it.

THE LAW OF DEMAND

• When the price of a good of service falls, consumers buy more of it. (P, then QD)

• As the price of a good or service increases, consumers buy less of it. (P, then QD)

• Quantity demanded and price have an inverse (opposite) relationship.

DEMAND SCHEDULES

• A demand schedule is a table that shows how much of a good or service an individual consumer is willing and able to purchase at each possible price.

•A market demand schedule shows how much of a good or service all consumers are willing and able to buy at each possible price.

EX. PETER’S DEMAND SCHEDULE

Price per DVD ($)

Quantity Demanded

30 025 120 215 310 45 7

EX. QUAHOG’S (MARKET) DEMAND SCHEDULE

Price per DVD ($)

Quantity Demanded

30 5025 7520 10015 12510 1755 300

DEMAND CURVES• A demand curve is a graph that shows how much of a good or service an individual consumer is willing and able to buy at each price.

• A market demand curve is a graph that shows how much of a good or service all consumers in a market are willing and able to buy at each price.

EX. PETER’S DEMAND CURVE

Pri

ce p

er

DV

D (

in

dolla

rs)

5

15

20

25

30

10

1 2 3 4 5 6 7Quantity Demanded of DVDs

WHY DO DEMAND CURVES SLOPE DOWNWARD?

•The Law of Diminishing Marginal Utility – the benefit from using each additional unit of a good or service during a given time period tends to decline as each is used.