1. 1.What is the left axis of a demand graph? 2.What is on the bottom axis of a demand graph? 3.What is the relationship between the two axis on a demand graph? 4.What affects quantity demanded? 5.What is the tem for “all other things held constant”? 6.According to the law of demand as water increases in price the quantity demanded will _________. 7.What is the same as a demand curve? 8.Why do you think economists separate quantity demanded from Demand?

2.  A change in the quantity demanded is caused by a change in price affecting a movement along the curve  Demand by an individual  A change in demand is a shift in the entire demand curve (Caused by five factors)  Demand by population as a whole Demand 1 Price Quantity Price Quantity

3. How many units an individual decides to buy at a given price. PricePrice Quantity

4.  The determinants of demand are…  The tastes of consumers  The number of consumers in the market  The income of consumers  Prices of related goods  Consumer expectations about future prices

5.  If prices rise then we feel poorer and tend to buy less.  If prices fall then we feel richer and tend to buy more  If our income rises we tend to buy more especially normal goods/less inferior goods  If our income falls we tend to buy less especially normal goods/more inferior goods

6.  Inferior Goods  Any good that consumers want to buy less of when income rises.  Pound Steak  Inverse relationship to income  Normal Goods  Any good that consumers want to buy more of when income rises.  Filet Mignon  Direct relationship to income

7.  Substitute goods are interchangeable - Butter and margarine  When two products are substitutes, the price of one good and the demand for the other are directly related  Coke-Pepsi

8.  Complementary goods “go together” – DVD players and DVD discs  When two goods are complementary, price of one and demand for the other inversely

9. TastesConsumers prefer product more Out Inc. Consumers prefer product lessInDec. IncomeNormal good-income increases Normal good-income decreases Inferior good-income increases Inferior good-income decreases Out In Out Inc. Dec. Inc. Price of Related Goods Substitute good-price increases Substitute good-price decreases Complement good-price increases Complement good-price decreases Out In Inc. Dec. Price Expect- ations Price level expected to rise Price level expected to fall Out In Inc. Dec.

10.  What affects Quantity Demanded?  What affects Demand?  If the price of snickers increases what will happen to the demand for twix? What caused the change in demand?  You just get a new high paying job, what kind of goods would be more likely buy now?  More people enter the country what will happen to demand

11. Define the following terms: Hold for discussion  Write the answers to these:  Law of Demand:  Substitution Effect: Give example  Diminishing Marginal Utility: Give example  Purchasing Power:

12. Changes in Demand- “Shifts” Warm up: Describe the Law of Demand, include the substitution effect and income effect in the description.

13. Changes in Demand  Demand Shifts: Time allows factors other than price to influence demand significantly.  In Economics these factors can shift the entire demand curve of a product to the right or to the left.

14. Changes in Demand  Determinants of Demand—Factors that can cause the entire demand curve to shift to either the right or left. 1.Consumer tastes and preferences 2.Market size 3.Income 4.Prices of related goods 5.Consumer expectations

15. Determinants of Demand 1.Consumer Tastes and Preferences: ex. Changes in music preferences  If a groups popularity rises—demand curve shifts to the right  If a groups popularity declines—demand curve shifts to the left.

16. Determinants of Demand 2.Market Size—The size of a market tend to affect demand.  Markets expand and contract  Nike launches new advertising campaign for its SHOX running shoes.  If successful, curve shifts to right

17. Determinants of Demand  Government Policy can affect size of markets—China trade policy example  New Technology can affect market size  Ex. Invention of video and internet cell phones  Old cell phone technology—demand curve shifts to the left.  New video technology—demand curve shifts to the right.

18. Determinants of Demand 3.Income—Higher incomes generally allows people to spend more money for goods and services which causes the demand curve to shift to the right.

19. Determinants of Demand 4.Prices of Related Goods—A change in a products price can affect demand for the products related goods.  Ex. Butter/Margarine—Margarine is substituted for butter when price of butter goes up.  Complementary Goods—Goods that are commonly used with other goods.  Ex. Paint / Paintbrushes  Price of paint increases—demand for paint and paintbrushes decreases

20. Determinants of Demand 5.Consumer Expectations—Your expectations for more future income influences your purchases today.  Ex. Anticipate a raise in your salary OR  If you anticipate being laid off !

21. Demand Shifts-Examples Tell the determinant and show what will happen—shift right or left?  Price of Artificial Sweetener Increases— what happens to sugar demand? Price Quantity

22. Demand Shifts-Examples Tell the determinant and show what will happen—shift right or left?  1950’s Musicals become “the rage” among 15-20 year olds. Show what might happen to DVD Sales in this category. Price Quantity

23. Demand Shifts-Examples Tell the determinant and show what will happen—shift right or left?  The government does a retroactive tax cut accompanied by a $1500 rebate check for everyone over 18. What happens to demand for movie tickets? Price Quantity

24. Demand Shifts-Examples Tell the determinant and show what will happen—shift right or left?  Detroit—a rumor spreads that GM is insolvent (doesn’t have sufficient money) and will have to close down 80% of its plants. What happens to demand for work shoes? Price Quantity

25. Demand Shifts-Examples Tell the determinant and show what will happen—shift right or left?  The price of motor oil for automobiles becomes 10x more expensive. What happens to demand for gasoline? Price Quantity