1. Economics
Chapter 4: Demand

2. Today’s Agenda Begin Chapter 4 Demand Homework
Complete Questions 1-7 by Friday

3. By the end of this lesson, I “demand” that you be able to:
Define Demand
Define elasticity and inelasticity
Explain what factors affect demand
Define diminishing marginal utility

4. What is Demand?
Amount of a good or service that consumers are willing and able to buy
Influenced by
Price
Consumers willingness to sacrifice
Income
Consumer must be able to afford it
Substitution
Alternate good or service available
Taste
Consumer must like the good or service

5. What does the Law of Demand say?
When price goes UP, demand goes DOWN
When price goes DOWN, demand goes UP
Demand Curve
Economic model illustrating law of demand

6. What is the elasticity and inelasticity of demand?
Elastic Demand
State in which a price increase has a major impact on demand
Rise in price of Doritos will greatly affect demand
Inelastic Demand
State in which price increase has little impact on demand
Rise in price of gasoline will not greatly affect demand

7. Factors that Decide if Demand is Elastic or Inelastic
Luxury or necessity
Luxury – want that is nice but not necessary
smartphone*, Camaro, tanning salon, shore house
Highly elastic demand
Necessity- needed to live
Food, water, shelter, healthcare
inelastic demand
Substitutions
Can the good or service be replaced with something else
Instead of Doritos, Fritos
Something easily substituted is highly elastic
Consumer Income
How much money consumer makes affects demand

8. Is this Hollister shirt elastic or inelastic? Explain why.

9. Today’s Agenda Finish Chapter 4 Slide Show
Complete Crossword Puzzle Review
Quiz on Chapter 3-4 next week (Wed or Thursday)

10. Review
What is the term for the amount of a good or service that consumers are willing and able to buy?
What is the term for demand in which a change is price greatly affects demand?
What is the term for demand in which a change in price does not affect demand?

11. What factors cause demand to change?
Income
More income allows more demand
Substitution
if there is an alternate
Coke: Pepsi
Comcast: Verizon
Bottled Water: Tap Water
Weather
Winter Storm: Snow shovels, salt
Summer time: Sunglasses, shorts
Population
More people means more demand
Finding a hotel room during 4th of July down the shore
Taste
What consumers like changes
Cigarettes, cassette players
Utility
More useful/satisfying a product the greater its demand

12. What is Diminishing Marginal Utility?
Usefulness and satisfaction consumer gets from product
More utility greater the demand
The more you like something, the more you are willing to pay!
Diminishing Marginal Utility
Point at which satisfaction decreases with each additional
Eventually each additional products is less satisfying