7DemandDemand 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.
8Demand Curve DEMAND CURVE Pt. Price of DVDs Quantity Demanded A $30 B B$251C$202D$153E$104F$55B25DEMAND CURVEC20D15E10F512345Quantity
10Movement on the CurveChange in quantity demanded is a change in PRICE or QUANTIY.This will cause you to move along the curve, up/down.We call these “movers”
11Change in Quantity Demand PriceBCDMoves along the curveEFQuantity
12Demand ChangesChange in demand meanwhile is a change in the AMOUNT YOU BUY.This means the curve will shift to the left or to the right.We call these “shifters”There are six factors that influence this.
13Change in Demand Shifts left or right A A B Price B C C D D E E F F Quantity
15SubstitutesSubstitutes 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.ExamplesPepsi or Coca ColaOrdering Pizza or Chinese for dinner
16Substitute’s price goes up ie. Coke Substitute’s price goes down PepsiPepsi
17ComplementsComplements 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.
18Complement’s price goes up Complement’s price goes down CerealCereal
19IncomePeople’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..
24Consumer Expectations If you expect a product to go on sale, you wait to buy that productExamplesCarsGasTickle-Me-ElmoSmart Phones
25Consumers expect price to rise Consumers expect price to fall IPhoneIPhone
26Market SizeThe size of the market is based on the number of consumers.ExamplePeople leaving Buffalo has caused a smaller market size.More people moving to Florida and Texas has created larger market sizes in these states.If people leave a region, the market size will decrease meaning the curve will shift to the left and vice versa.
28Elasticity of DemandElasticity of demand is how responsive consumers are to price changes.Elastic demand – quantity demanded will change greatly as price changes.
29Elastic DemandPriceWhen demand is elastic, prices will not change much, but quantity demanded will change.3025DEMAND CURVEA20BC15DEF10512345Quantity
30Inelastic DemandPriceAInelastic demand states that quantity demanded will change little as price changes.30B25DEMAND CURVEC20D15E10F51020304050Quantity
31Factors that Determine Elasticity Are there good substitutes?Yes = Elastic No = InelasticWhat proportion of income does it use?Large = Elastic Small = InelasticIs it a necessity or a luxury?Luxury = elastic Necessity = inelastic