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4.1 What is Demand?

Law of Demand

Quinn Graves

on 7 May 2012

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Transcript of 4.1 What is Demand?

What is

The Law of Demand
Key Concepts
Demand- the desire for an item and the ability to pay for it
Law of Demand
-when price of good and service goes up quantity demanded goes down

-when price of a good or service goes down quantity demanded goes up
Example: Price & Demand
Law of demand explains consumer behavior as well as economic concepts
Cheryl decides to spend 45 dollars on dvd's
-at $15 each, Cheryl demands 3 dvds

-at $5 each, she demands 9 dvds
Demand Schedules
Key Concepts
Demand Schedule- a table that summarizes one consumer's behavior
-list how much of an item individual will buy at each price
Market Demand Schedule- a table that summarizes all consumers behavior
-lists how much of an item all consumers will buy at each price
Individual Demand Schedule
Demand schedule is a two-column table
-left hand column lists various prices of a good or service

-right hand column gives quantity demanded at each price
Cheryl's DVD Demand Schedule
-quantity demanded and price have an inverse relationship
Market Demand Schedule
Business owners need information about consumer demand
-help them price good to get the most sales
Market Research- gather and evaluate data about customer preferences
Market demand schedule similar to individual demand schedule
-except quantities demanded are larger

-market demand also depends on price
Key Concepts
Demand Curves
Demand curve- graph that shows amount of an item consumer will buy at each price
Market demand curve- amount on consumers will buy at each price
Demand curves graphically show information found on demand schedules
Individual Demand Curve
Demand curve is visual representation of law of demand
-assume all economic factors except price stay the same
Vertical axis shows price
Horizontal accessions quantities demanded
Demand curves slope down from upper left to lower right
Market Demand Curve
Market demand curve constructed same way as individual demand curve
Market demand curve includes all consumers of a product
-quantities demanded a much larger than on individual demand curve
Illustrates inverse relationship between price and quantity demanded
-assumes all economic factors constant except price
Vera Wang:
Designer in Demand
Responding to Demand
Sophisticated wedding gowns not available for career women
Wang created line wedding gowns to meet demand
Style became popular other designers imitated
Wang created more demand for her style by designing other products
Full transcript