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Economics Chapter 4 Section 1. Into to Demand Demand - the desire, ability, and willingness to buy a product Demand - the desire, ability, and willingness.

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Presentation on theme: "Economics Chapter 4 Section 1. Into to Demand Demand - the desire, ability, and willingness to buy a product Demand - the desire, ability, and willingness."— Presentation transcript:

1 Economics Chapter 4 Section 1

2 Into to Demand Demand - the desire, ability, and willingness to buy a product Demand - the desire, ability, and willingness to buy a product Microeconomics- the area of economics that deals with behavior and decision making by small units such as individuals and firms Microeconomics- the area of economics that deals with behavior and decision making by small units such as individuals and firms Knowledge of demand is important for business planning Knowledge of demand is important for business planning

3 Into to Demand How do you gauge demand? Visit other shops, poll consumers about prices, study data compiled over past years How do you gauge demand? Visit other shops, poll consumers about prices, study data compiled over past years Demand schedule- a list that shows the various quantities demanded at all prices that might prevail in the market at a given time- usually people will buy more as the price gets lower Demand schedule- a list that shows the various quantities demanded at all prices that might prevail in the market at a given time- usually people will buy more as the price gets lower

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5 Into to Demand The Individual demand curve- takes the info from the individual demand schedule and places them as points on a graph. After connecting the points you have a demand curve- showing the quantity demanded at each price The Individual demand curve- takes the info from the individual demand schedule and places them as points on a graph. After connecting the points you have a demand curve- showing the quantity demanded at each price

6 Law of demand Law of Demand- states the quantity demanded of a good or service varies inversely with its price- when price goes up quantity demanded goes down Law of Demand- states the quantity demanded of a good or service varies inversely with its price- when price goes up quantity demanded goes down The inverse relationship between price and quantity demanded is something we find in study after study The inverse relationship between price and quantity demanded is something we find in study after study Common sense and simple observation are consistent with the law of demand Common sense and simple observation are consistent with the law of demand

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8 Law of Demand Market demand curve- the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product Market demand curve- the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product The difference between the individual demand curve and the market demand curve is that the market includes everyone interested in the product The difference between the individual demand curve and the market demand curve is that the market includes everyone interested in the product

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10 Law of Demand Marginal Utility- extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product Marginal Utility- extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product Diminishing marginal utility- the extra satisfaction we get from using additional quantities of the product begins to diminish Diminishing marginal utility- the extra satisfaction we get from using additional quantities of the product begins to diminish We are not willing to pay as much for the 2 nd, 3 rd, 4 th, and so on We are not willing to pay as much for the 2 nd, 3 rd, 4 th, and so on

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