1. MICROECONOMICS

2. Microeconomics The study of behavior and decision making by small units: –Individuals –Companies/Corporations/Firms

3. DEMAND The desire, ability, and willingness to buy a product.

4. How do stores where you shop manipulate your demand for their products? DEMAND

5. Classroom Assignment Step 1 Work in groups of 2-4 students. Pick a product you want to buy. Estimate the actual cost to manufacture the product. Explain why the retail cost to you is so much higher. Estimate the profit of the retailer.

6. Devise at least 3 ways that the retailer could manipulate DEMAND on your product to increase sales. Share with the class. Due at end of period. Classroom Assignment Step 2

7. The Law of Demand When the price goes up, the demand goes down. When the price goes down, the demand goes up.

8. Individual versus Market Demand Curves Individual demand curve shows how one person will react to changes in price. Market demand curve shows how all people collectively will react to changes in price.

9. Demand and Marginal Utility UtilityUtility – The amount of usefulness or satisfaction that someone gets from the use of a product. Marginal UtilityextraMarginal Utility – The extra satisfaction that someone gets from acquiring or using one more unit of a product.

10. Diminishing Marginal Utility The extra satisfaction we get from using additional quantities of the product begins to diminish. Because of diminishing satisfaction, we are not willing to pay as much for the second, third, etc.

11. How many colas are you willing to buy? How many Snickers are you willing to eat? When you reach the point where “marginal utility” is less than the price, you stop buying. Diminishing Marginal Utility