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Transcript of Demand
The various quantities of a
product a person is
at different prices.
Demand schedules are made by listing the quantities of a good or service consumers will buy at each of several
Shift in Demand
Typically, consumers will buy more or less of a good or service based upon the price.
Change in Income
A rise in a person's income will cause a person to want more of everything at all prices!
think about it ... rich people buy more stuff than poor people!
Change in Preferences or Taste
Change in Population
More consumers = increase in total demand for a good
Change in Substitute Goods
If a product becomes more expensive, consumers will find substitutes that cost less and vice versa.
If the price of DVDs goes up, we won't want DVD players
Law of Demand
when all other things remain the same...
as price quantity demanded
as price quantity demanded
in a market/mixed economy,
people want the price to be LOWER
while suppliers want the price
to be HIGHER
people demand different amounts at different prices
plot the points for the BEEF
when you plot points from the demand schedule, you get the demand CURVE
The demand curve slopes downward because as price increases, quantity
Quantity Demanded -- the points represent how much we want at each price... connect the dots, you get the demand curve.
PRICE is the only thing that changes in this situation to alter the quantity we demand.
for example: if dip increases in price to $10 a can, there will be less demand for it. the only thing that changes the demand is price.
example 1 ... in the market for dip
if it turns out that dip is good for you (yeah right), our demand for dip will increase at ALL prices. This causes the entire curve to SHIFT
our demand for a product can be altered by many things.
we call these the factors/determinants that SHIFT demand to the left or right
Remember it with the phrase....
a social trend or change in people's preference for a good.
Mad cow disease will cause people to want less beef, no matter the price.
AJ McCarron becomes the spokesman for Nike... "everyone" will want more Nike products no matter the price.
example: Coca-Cola sells 1.5 million bottles of soda a day to many countries around the world. The country of Ethiopia starts shipping in Coca-cola for the first time....
now there are more people who Demand Coca-cola.
item used in place of another good
Change in Complimentary Good
Goes with another good
if you know a good will be on sale next week, you are going to wait until it is on sale to buy it. Just like if it is on sale this week, you will demand more.
ex: Coca-Cola is on sale for $1.50 a case. (instead of regular price of $5 a case).
You buy 4 cases instead of the 1
you went to the store for.
an INCREASE in demand moves to the RIGHT
a DECREASE in demand
moves to the LEFT
Elasticity of Demand
how much our quantity demanded changes in response to a change in price.
is it elastic??
elasticity is based on:
1) if there are
can I find something to use in place of it? If so, when the price changes I will not demand that product... I will use the substitute!
the price of Herbal Essences shampoo goes from $3 to $15....
I am going to buy a different brand
so, my demand for Herbal Essence shampoo is ELASTIC.
Elastic = demand changes GREATLY with a change in price
Inelastic = demand does NOT CHANGE with a change in price
2) the importance of the good
how much do you need the good?
gas prices are about $3.27 a gallon. It costs about $48 to fill up my Honda.
If gas prices went up to $5.11 a gallon (making it $77 to fill up my car)... could I just stop buying gas?
This makes my demand INELASTIC... I have to have gas to get to work!
3) change over time
will the product change?
will this be "THE PRODUCT" that everyone uses?
ex: an iPhone... it is "the" phone to have.
Few people buy the brand new version when it is $500... but when the price changes slightly ($299) the demand goes way up... you have to have an iPhone to function in life don't you?!
this makes the demand for iPhones ELASTIC
for each of the letters, choose if demand is elastic or inelastic and explain WHY
remember that marginal cost and marginal benefit still apply...
pair 1 of pants for $6 on clearance is AWESOME... but what about the 9th pair? Still as awesome?
is the benefit greater than the cost?
So, is my demand as high?
which graph is ELASTIC?
which is INELASTIC?
move from point B to point A
example 2 ... If it turns out that dip makes your bottom lip fall off, our demand for dip will decrease at all prices (because you want to keep your lip!).
This causes the entire curve to shift Left.