Demand Standard 1.3.2

What does the word demand mean? Explain what you demand Bellwork What does the word demand mean? Explain what you demand

Quick Q What are some of the most influential factors in determining peoples choices in the marketplace?

Law of Demand: Definition… An Increase price causes decrease in Quantity Demanded Decrease in price causes an increase in Quantity Demanded

Quick Write With your table partner, make a quick list of “products/goods” you think are the best selling of ALL time. If you can make a TOP 10. We will then see how close you to the actual list! http://www.businessinsider.com/10-of-the-worlds-best-selling-items-2015-7

h i Law of Demand THE MORE SOMETHING IS, THE LESS PEOPLE CAN BUY Quantity demanded and price move in opposite direction Price Quantity Goes Demanded h i THE MORE SOMETHING IS, THE LESS PEOPLE CAN BUY

Would you rather have a 5 dollar pizza or a 135 dollar pizza?! Lets test it out! Would you rather have a 5 dollar pizza or a 135 dollar pizza?! https://www.youtube.com/watch?v=vzSfnduxNDg

i h Law of Demand Price Quantity Goes Demanded THE CHEAPER SOMETHING IS, THE MORE PEOPLE CAN BUY

Demand vs. Quantity Demanded Demand: how many things you would be willing to buy at many difference prices Quantity Demanded: how many things you would buy at one specific price/time period

HW Objective: I can define demand and explain the law of demand Language Objective: I can discuss the concept of demand and the law of demand HW: The Next Great Invention Finish Chapter Vocab from textbook

Explain the law of demand Bellwork Explain the law of demand

Demand Essential Question: How do consumers use the law of demand to respond to changes in market condition?

What influences your demand? What influences your demand? Why does the Law of Demand exist? Three main things… 1. Income Effect 2. The Substitution Effect 3. Diminishing Marginal Utility

1 Income Effect: any increase or decrease in consumer’s purchasing power caused by change in price Our resources ($$) is limited so price changes can impact our demand

Pause Talk and Turn Table Partners When and where was the last time you ate out at an actual dine in restaurant? Did you consider expensive? Was it worth it? (use cost-benefit analysis skills)

Income Effect Applied http://time.com/money/4505724/restaurants-prices-going-out-for-lunch/ “Restaurant customer traffic is down—especially during the lunch hours—and the big reason why is that going out to eat simply costs too much.” “NPD researchers found that many restaurants have increased prices to the point that consumers now feel like they’re poor values.”

TALK AND TURN TABLE PARTNERS ROUND 2! Which one is better? Which one would you rather buy? Which one can you buy?

2 Substitution Effect: When customers choose not to buy an expensive thing but buy a cheaper, similar thing instead Growth of Dollar Stores: “And Dollar General isn’t the only dollar chain to have had success in recent years. Competitors Dollar Tree and Family Dollar have also experienced significant growth in revenue since the 2008 recession, when many consumers began shopping at discount chains for everyday items like cleaning supplies, toiletries and groceries.”

Diminishing Marginal Examples… What decreases as Squidward eats the crabby pattys? Value of each food item https://www.youtube.com/watch?v=hlpBw48bgEo Is demand limitless? No!

Diminish=Go down Utility= Value 3 Diminishing Marginal Utility: As more units of a product are consumed, the satisfaction received from consuming each additional unit goes down Diminish=Go down Utility= Value

Pause & Free Write We all have a diminishing marginal utility story! No it does NOT have to involve only food. Take 2 minutes and free write a story or long example that fits with our understanding of diminishing marginal utility Share-Out

Graphing… What does diminishing utility look like visually by graph? This is the same way we graph demand

Demand Schedule Do a quick sketch of this chart (A and B, and C only) Charts!

Objective / HW Objective: I can describe the factors that change demand Language Objective: I can read and discuss the factors that change demand HW: “Create Your Own Demand Schedule & Graphing Assignment” Follow directions properly with Law of Demand and examples from notes Basics of Demand Assignment Finish Chapter 4 Vocabulary

Describe the substitution effect What is diminishing marginal utility Bellwork Describe the substitution effect What is diminishing marginal utility

What is a demand curve? Demand Curve: a graph showing how the demand for a commodity or service varies with changes in its price.

Demand Curve: the quantities demanded at each price by consumers Law of Demand **Price is the main variable affecting demand but will NEVER shift demand** Demand Curve: the quantities demanded at each price by consumers

Determinants of Demand Other factors influence demand as well, its not just price These factors can shift the entire demand curve left or right, instead of simply causing a slide along the old demand curve These are called the Determinants of Demand

Determinates of Demand MAIN IDEA: If demand increases the demand curves SHIFTS to the RIGHT

Determinates of Demand MAIN IDEA: If demand decreases the demand curve SHIFTS to the LEFT

5 Determinates of Demand 1. Changes in Number of Consumers 2. Changes in Income 3. Changes in Tastes and Preferences 4. Substitutes 5. Complementary Goods

Determinants of Demand

Increase in Number of Consumers The demand curve moves right (increases) when number of consumers grows More people = More Demand

Decrease in Number of Consumers The demand curve moves left (decreases) when number of consumers shrinks Less people = Less Demand

More Money = More Demand Changes in Income The demand curve moves right (increases) when Income grows More Money = More Demand

Less Money = Less Demand Changes in Income The demand curve moves left (decreases) when income shrinks Less Money = Less Demand

Changes in Tastes and Preferences The demand curve moves right (increases) when people choose to buy certain items because of fads or popularity More Sales = More Demand

Changes in Tastes and Preferences The demand curve moves Left (decreases) when the items becomes less popular. Less Sales = Less Demand

Less Competition = More Demand Substitutes The demand curve moves right (increases) when the price of a similar item goes up Less Competition = More Demand

More Competition = Less Demand Substitutes The demand curve moves left (decreases) when the price of similar item goes down More Competition = Less Demand

Complementary Goods The demand curve moves right (increases) when the price of a complementary good goes down

Complementary Goods The demand curve moves left (decreases) when the price of a complementary good goes up

Key Point to Remember!! The price of the product itself will never cause a shift (left/right) in demand. Only the 5 Determinants will shift the demand curve and create a brand new one.

\ What has caused this shift in demand? A. an increase in the price of film B. an increase in the price of cameras C. a decrease in the price of film D. a decrease in the price of cameras

Which direction does the Demand Curve Move? Situation: The Ford and Chrysler have just guaranteed a 15% cut in wages for all employees. What will happen to the demand for luxury goods in areas with a lot of auto workers? What determinate are we using?: CHANGE IN INCOME What direction will the Demand Curve move?: LEFT

Which direction does the Demand Curve Move? Situation: If Kroger has a great sale on spaghetti sauce, what effect should they expect it to have on spaghetti noodles? What determinate are we using?: COMPLIMENTARY GOODS What direction will the Demand Curve move?: RIGHT

Objective / HW Objective: I can analyze the determinants of demand and their ability to shift a demand curve Language Objective: I can read and discuss how the determinants of demand shift a demand curve HW: Analyzing the Determinants of Demand Finish Chapter 4 Vocab

What are the determinants of demand? DO NOW What are the determinants of demand? What is the one thing that will never shift demand?

Real Life Activity with Demand!

HW Objective: I can evaluate the law of demand using real life examples Language Objective: I can read and discuss the law of demand using real life examples HW: Demand Hotel Activity Finish Early? Make sure your formative work is completed! Chapter 4 Vocab Basics of Demand Analyzing the Determinants of Demand

“Do Now” (Rubber Band) As a consumer, how sensitive are you to changes in an increase price? What are products you would continue to buy after a price increase? What are products you would stop buying?

Price Elasticity of Demand Main Idea: Elasticity of Demand: measures how much the Quantity Demanded changes when price goes up or down

Elastic Demand Definition: Elastic Demand: Situation in which a given rise or fall in a products price “greatly” affects the amount that people are willing to buy Big Change in Quantity Demanded!

Things that we want, but do not need Elastic Demand Examples: Things that we want, but do not need Higher priced goods, Brand name items, luxury goods

Inelastic Demand Definition: Inelastic Demand: Situation in which a product’s price change has “little” impact on the Quantity Demanded by consumers

Inelastic Demand Examples: These are Needs and will still be purchased regardless of price Medication, staple foods, Gasoline

More Info HOW DO I FIGURE OUT IF A PRODUCT OR SERVICE IS INELAESTIC OR ELASTIC! Write them down!

HW Objective: I can describe and analyze the concept of “elasticity/inelasticity” Language Objective: I can read and speak about elasticity/inelasticity HW: Futurama Questions Video Review Elastic Demand Examples Worksheet

Review Guide Define: Law of Demand What affects a slide along the demand curve? Determinants of Demand / Shifting the Curve Substitution Effect Income Effect Diminishing Marginal Utility Demand Inelastic / Elastic (Understand differences between the two)

Explain the difference between inelasticity and elasticity Do Now Explain the difference between inelasticity and elasticity