DEMAND

What you write: Demand (D) is the desire, willingness, and ability to buy a good or service Demand is on the consumer’s side What you need to know: What is demand? The definition is a “combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment”

The Why?: Because if you want it, they will make it

What you write: Demand (D) = Price (P) and Quantity (Q) What you need to know: How is demand calculated? The calculation of demand comes down to only two variables: the price of a product and the quantity available at a given point in time

KEY TERM: ceteris paribus – “other things held constant”

What you write: What you need to know: What is a demand schedule? The definition is a “listing showing the quantity demanded at all possible prices that might prevail in the market at a given time” PRICEQUANTITY DEMANDED $1 $20 $50 $100 $200 $500

What you write: What you need to know: What is a demand curve? The definition is a “graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time” Price (P) Quantity Demanded (Q) $1 $20 $50 $100 $200 $500 demand curve slopes downward Demand (D)

What you write: People are normally willing to buy less of a product at a high price and more at a low price Law of Demand = inverse relationship As the price goes UP the demand goes DOWN What you need to know: What is the Law of Demand? The definition is a “rule stating that more will be demanded at lower prices and less at higher prices; and inverse relationship between price and quantity demanded”

Law of Demand: price and quantity demanded move in OPPOSITE DIRECTIONS

UTILITY: ability or capacity of a good or service to be useful and give satisfaction to someone- satisfaction, usefulness, or pleasure it gives us

Do you have the same utility for these goods?

KEY TERM: marginal – additional / next one

How much are you willing to pay for the first candy bar? The second? The third? The fourth?

What you write: diminishing marginal utility = the decreasing satisfaction a consumer receives with the purchase of each additional unit What you need to know: What is diminishing marginal utility? The definition is a “decrease in additional satisfaction or usefulness additional units of a product are acquired”

Changes in Demand An increase in the Price of Widgets from $3 to $4 will lead to a decrease in the Quantity Demanded of Widgets from 6 to 4. What you need to know: Changes in the quantity demanded due to a price change occurs ALONG the demand curve

Change in Price = Change in Quantity Demanded = Movement ALONG the Curve

∆P = ∆Q = Movement ALONG the Curve

What you write: Buyers (# of) - changes in the number of consumers Income - changes in consumers’ income Tastes - changes in preference of product/service Expectations - changes in what consumers expect to happen in the future Related Goods - complements and substitutes What you need to know: Changes in demand (∆D) can also SHIFT in response to five factors

What you need to know and write: Substitute Goods – a substitute is a product that can be used in the place of another EXAMPLE: If the price of COKE goes UP Then the demand of PEPSI goes UP

What you need to know and write: Complementary Goods – a complement is a good that goes well with another good EXAMPLE: If the price of MILK goes UP Then the demand of CEREAL goes DOWN

Several factors will change the demand for the good (shift the entire demand curve) As an example, suppose consumer income increases. The demand for Widgets at all prices will increase. What you need to know and write: Increase in demand shifts to the RIGHT (more demanded at each price)

As an example, suppose Widgets become less popular to own. Demand will also decrease due to changes in factors other than price. What you need to know and write: Decrease in demand shifts to the LEFT (less demanded at each price)

Change in Price = Change in Quantity Demanded = Movement ALONG the Curve

∆P = ∆Q = Movement ALONG the Curve

Changes in any of the factors OTHER THAN PRICE causes the demand curve to shift