DEMAND Chapter 4 (Pages 89-93)

Warm up Questions: February 28, 2017 Have you ever wanted to buy something expensive? Did you wait until the price came down to buy it, or did the price not worry you? After you bought it, did you want to buy more of it? Why or why not?

Key Terms Demand (P. 89) Microeconomics (P.89) Demand schedule (P.90) Demand curve (P.91)

What is the Law of Demand? The quantity demanded of a good varies inversely with its price. If the price of tvs drops, the quantity demanded will increase.

DEMAND ARTICLE ACTIVITY What item is your news article/video clip about? Why is there a great demand for this item? How does the price of this item influence its demand? How can the manufacturer of this item increase the demand for the item? Do you think that the demand for this item will increase or decrease in the future?

Warm up Questions: March 1, 2017 Why do you think that the demand for luxury items ( for example: leather bags and designer watches) is higher in some neighborhoods compared to others?

Key Terms Law of Demand (P. 91) Market demand curve (P.91) Marginal utility (P. 93) Diminishing marginal utility (P. 93)

Introduction to Demand Desire, ability, and willingness to buy a product Individual demand curve Economists analyze demand

Question 1 Think about an item you want to buy. What is the price? At what price would you buy the item?

The Law of Demand Quantity demanded of a good or service varies with its price When price goes up, quantity demanded goes down When price goes down, quantity demanded goes up Market demand curve

Question 2 Why is price a consumer's obstacle to buying?

Demand and Marginal Utility Extra usefulness or satisfaction from using one more unit of a product Principle of diminishing marginal utility- Satisfaction we gain from buying a product lessens as we buy more of the same product

Question 3 Give an example in which buying more of a product gives us less satisfaction?

Closure Question How does an increase or decrease in price affect how much of a product is bought?

Warm up Questions: March 2, 2017 Using the diagram above explain how the law of demand works. Give an example of the law of demand.

How does the law of demand work with the price of milk?

Closure Question How would you summarize in a few sentences what you learned in the video about the law of demand?

Warm up Questions: March 6, 2017 Explain a time when you wanted to buy an item and found it on sale. Did you buy more of that item because of the sale?

Key Terms Change in quantity demanded (P. 95) Income effect (P.96) Substitution effect (P. 96)

Change in the Quantity Demanded Change in quantity demanded shows a change in the amount of the product when there is a change in price The income effect means that as the prices drop, consumers are left with extra real income The substitution effect means that price can cause consumers to substitute one product with another similar but cheaper item

Reflective Question 1 Imagine you have a weekly budget for groceries. When you shop one week, certain items you needed were on sale, and after you paid the cashier, you had $20 left. What would you do with the extra money?

Change in Demand Consumer income- If income increases one can buy more products and demand grows. If income goes down, fewer products can be bought and demand decreases

2.Consumer tastes- People buy more products when they are advertised, in the news, in fashion, new, or in season

3. Substitutes- Some products are similar and a change in price can affect the demand for one of other. Substitutes are goods that that can be used in place of other goods. If the price of a good goes down, demand for its substitute goes down. If demand for butter increases, the demand for margarine grows. If the price for margarine increases, demand for butter increases

Reflective Question 2 CD’s are today’s most popular form of musical recordings. What would happen if the demand for “vinyls” increases?

4. Complements- Products that are used with each other where demand for one increases the demand for the other. For example hot dogs and hot dog buns. If the price for hot dogs goes down, more hot dog buns are bought. If the price for hot dogs goes up, then fewer hot dog buns are bought.

5. Change in Expectations: How people think about the future affects what and how they will buy. If people think a product will help them in the future, they will hold off buying one that is available now, which decreases the demand for the product that is available now. If people think a product will not be available in the future, they will stock up before it is hard to find. This increases demand

6. Number of consumers- As population increases, more people demand buying more products. Demand increases as a whole.

Closure Question How would you summarize in a few sentences what you learned today about the changes in demand?

Warm up Questions: March 7, 2017 Explain a time when you bought a product that you needed and the cost was not important. What was the product? Why did the cost not matter to you?

Key Terms Change in demand (P. 96) Substitutes (P.98) Complements (P. 98)

Introduction The study of economics tries to understand how an action will affect an outcome This is a cause-and-effect relationship- an example is elasticity Elasticity- Measure of change in how much a person will buy if there is a change in a products price

Demand Elasticity This measure how much a change in price affects demand Demand is elastic when a small change in the price of a product causes a larger change in demand Demand is inelastic if people want nearly the same amount of a product at both higher and lower prices Demand is unit elastic when a change in price cause a similar change in the amount demanded

Reflective Question 1 What are examples of items which an increase in price would cause you to reconsider buying it?

Total Expenditure Test One way to measure elasticity is to test the effect of a price change on total expenditures.Total expenditures are the amount that buyers spend on a product at a certain price In economic terms, the price is multiplied by the quantity demanded When price and total expenditure move in opposite directions, demand is elastic, when both price and total expenditure move in the same direction, demand is inelastic. When there is no change in price and expenditure, demand is unit elastic

Reflective Question 2 What are examples of items for which a drop in price would encourage you to buy more of an item?

Determinants of Demand Elasticity Can the purchase be put off? - A product is needed (medicine) and must be purchased no matter the cost, making demand inelastic. If the buyer thinks the price is too high, and the product can be bought later (cell phone), demand is elastic

2. Are enough substitutes available 2. Are enough substitutes available?- If enough substitutes are available (cheese), the buyer can choose the one that has the best price. The more substitutes there are, the more elastic the demand. The fewer substitutes (medicine), the more inelastic the demand

3. Does the purchase use a large proportion of income 3. Does the purchase use a large proportion of income?- Products or services requiring a small portion of a person’s income (food) are inelastic. Products taking a large amount of income (house or car), the buyer will notice the increase or decrease in price, making demand elastic

Reflective Question 3 What are some items you buy for which price is not an issue?

Summary What is an elastic good? Examples of elastic goods are coffee, airline tickets and stocks. Examples of inelastic goods are water, electricity, and telephone service. The elasticity of a good is the sensitivity of its demand to changes in its price. https://www.google.com/search?safe=strict&espv=2&q=example+of+price+elasticity&oq=example+of+price+elasticity&gs_l=serp.3..0i7i30k1j0j0i7i30k1l3j0j0i7i30k1l4.73241.76061.0.94 952.6.5.1.0.0.0.92.376.5.5.0....0...1c.1.64.serp..0.4.241...0i13k1j0i8i7i30k1.1JXgsiblN3U

Are luxury goods price elastic or inelastic? Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good. This also means, however, that should there be a decline in income its demand will drop.

What is the main factors that influences a demand's price elasticity? The availability of substitutes - This is probably the most important factor influencing the elasticity of a good or service. In general, the more substitutes, the more elastic the demand will be.

Closure Question How would you summarize in a few sentences what you learned today about the elasticity of demand?

Warm up Questions: March 8, 2017 Would the demand for airline tickets be elastic or inelastic? Explain your answer. Would the demand for diabetes medicine be elastic or inelastic? Explain your answer.

Closure Question How would you summarize in a few sentences what you learned today about how demand elasticity is different for different services and products?