#  Your favorite team is in the Super Bowl:  1. How many tickets are available?  2. How many people want tickets?  3. What determines the price of a.

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 Your favorite team is in the Super Bowl:  1. How many tickets are available?  2. How many people want tickets?  3. What determines the price of a ticket?

 Demand: The desire to own something and the ability to pay for it.  Law of Demand: As the price of a good increases, quantity demanded decreases (and vice versa)  In other words: when price goes up, we buy less…when price goes down, we buy more

 1. The Substitution Effect. occurs when consumers react to an increase in a good’s price by consuming less of that good… and more of other goods that satisfy the same basic need. OR

 2. The Income Effect: The quantity of an item you consume changes if its price changes but your income does not.

 Demand Schedule: a table that lists the quantity of a good that a person will purchase at each price in the market.  Market Demand Schedule: a table that lists the quantity of a good all consumers in a market will buy at each different price.

Demand Schedules Individual Demand Schedule: Market Demand Schedule: Price of Pizza Slice Quantiy Demanded/dayPrice of Pizza Slice Quantiy Demanded/day \$ 0.505 300 \$ 1.004 250 \$ 1.503 200 \$ 2.002 150 \$ 2.501 100 \$ 3.000 50

 Assuming I get my candy for free, if the following market demand schedule is true, how much should I charge for M&M’s? Why? Market Demand Schedule for M&M's: Price of M&M'sQuantity Demanded/Day A.\$2100 B.\$1200 C.\$0.50500 D.\$0.25700

Market Demand Schedule for M&M's: Price of M&M'sQuantity Demanded/DayProfit A.\$2100 \$200 B.\$1200 \$200 C.\$0.50500 \$250 D.\$0.25700 \$175

 Demand Schedule: a table that lists the quantity of a good that a person will purchase at each price in the market.  Market Demand Schedule: a table that lists the quantity of a good all consumers in a market will buy at each different price.

 So what is a demand curve?  Very Simple, a demand curve is just a graphical representation of a demand schedule.

Market Demand Schedule: Price of Pizza Slice Quantiy Demanded/day \$ 0.50300 \$ 1.00250 \$ 1.50200 \$ 2.00150 \$ 2.50100 \$ 3.0050

1. Complements: Products that you would purchase together. (Ex, Chips and Salsa). 2. Substitutes: Products that are similar. You would buy the other if the price of one got too high (Ex: Coke and Pepsi).

3. Normal Good: A product that you buy more of as your income goes up. (EX: Cars, clothes, Xbox games, almost everything. 4. Inferior Good: A product you buy less of as income increases. (EX: Ramen Noodles, Mac & Cheese

Market Demand Curve 3.00 2.50 2.00 1.50 1.00.50 0 050100150 200250 300 350 Slices of pizza per day Price per slice (in dollars)

 Can only be used to predict how people’s buying habits might change when price and ONLY price changes  When price changes, it is called a movement along the demand curve or a change in quantity demanded (there’s no way to simply remember this…you must memorize! Sorry.)

 Horizontal axis shows quantity  Vertical axis shows price  Let’s talk about horizontal, vertical, and quantity.

Remember this market demand schedule for pizza? Market Demand Schedule: Price of Pizza Slice Quantiy Demanded/day \$ 0.50300 \$ 1.00250 \$ 1.50200 \$ 2.00150 \$ 2.50100 \$ 3.0050

 IMPORTANT: That demand schedule shows what happens to the quantity of pizza demanded when price, and ONLY price changes.  But there are other things that can cause the ENTIRE demand curve to shift.

 Causes of a change in demand:  1. Income (if we make more \$, we will demand more of a good at any price. The opposite is also true!).  2. Consumer expectations (If we expect prices to rise in the future, we’ll be more likely to spend more \$ now. If we expect a sale, we will be less likely to spend more now).

 3. Consumer tastes and advertising (Think about it…why do companies use celebrities to promote their products?).  4. Population (If population goes up…so does demand. Think baby boomer gen.).  5. Prices of related goods (substitutes and compliments). (If the price of tortilla chips increases, what will happen to the demand for salsa?).

Market Demand Curve 3.00 2.50 2.00 1.50 1.00.50 0 050100150 200250 300 350 Slices of pizza per day Price per slice (in dollars)

 What is the difference between a “ change in quantity demanded” and a “change in demand” ?  Change in Quantity Demanded: a movement along the demand curve caused by a change in price

 Change in Demand: A shift in the demand curve due to factors other than price. Basically it shows that demand has changed at all different price levels.  Put a star next to this point in your notes.

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