1. Key Terms –demand –demand schedule –demand curve –Law of Demand –market demand curve –marginal utility –diminishing marginal utility

3. Demand–the desire, ability, and willingness to buy a product–can compete with others who have similar demands. Microeconomics is the area of economics that deals with behavior and decision making by small units, such as individuals and firms.

4. In a market economy, people and firms act in their own best interests to answer the WHAT, HOW, and FOR WHOM questions. Knowledge of demand is important for sound business planning.

5. How do you measure the demand for your services? –You may visit other shops and gauge the reactions of consumers to different prices. –You may poll consumers about prices and determine demand from this data. –You could study data compiled over past years, which would show consumer reactions to higher and lower prices. All of these methods would give you a general idea as to the desire, willingness, and ability of people to pay.

6. A demand schedule is a listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time. * Note that Price is labeled and well as QD

7. Demand curve = a graph showing the quantity demanded at each and every price that might prevail in the market. * Note that the graph is labeled with Price and Quantity. * Label the demand curve “D”.

8. The Law of Demand states that the quantity demanded of a good or service varies inversely with its price. –When the price goes up, quantity demanded goes down. –When the price goes down, quantity demanded goes up.

9. Price is an obstacle which discourages consumers from buying. The higher this obstacle, the less of a product they will buy; the lower the obstacle, the more they will buy. Common sense and simple observation are consistent with the Law of Demand.

10. A market demand curve shows the quantities demanded by everyone who is interested in purchasing the product. The only real difference between the individual demand curve and the market demand curve is that the market demand curve shows the demand for everyone that is interested in buying the product.

11. Utility = the amount of usefulness or satisfaction that someone gets from the use of a product. Marginal utility is the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product. The reason we buy something in the first place is because we feel the product is useful and that it will give us satisfaction.

12. Diminishing marginal utility = the extra satisfaction we get from using additional quantities of the product begins to diminish. Because of our diminishing satisfaction, we are not willing to pay as much for the second, third, fourth, and so on, as we did the first.

13. When you reach the point where the marginal utility is less than the price, you stop buying.

14. Show me the demand! 1.Pick a product or service. 2.Create a demand schedule based on 10 different and real price points. 3.Graph that demand curve, making sure to label everything on the graph! 4.Turn it in when you are done.