Standard: Students will examine and analyze economic concepts such as demand, so that they may understand the production, distribution, and consumption of goods and services in our Capitalistic system.

Objective 1: Use data from charts and graphs to understand information relevant to the field of Economics. Objective 2: Define the key economic concept of demand, and analyze factors affecting it.

Demand --the willingness and ability of consumers to buy goods and services. Quantity Demanded --what people buy at different prices.

Ex. Very few buy pencils at $.50, but many buy at $.05. Law of Demand – as the price goes up, the amount demanded goes down and as price goes down, demand goes up. Ex. Very few buy pencils at $.50, but many buy at $.05.

Demand Schedule--Listing which shows how much is demanded at certain prices. Price CD’s demanded *Economists study demand schedules when looking at the demand for a certain product. $20 1,100,000 $18 2,000,000 $16 4,000,000 $14 5,500,000 $12 7,800,000 $10 9,000,000

$ Demand Curve--points plotted on a chart to show demand of a product. _ $20 $ 18 16 14 12 10 1 2 3 4 5 6 7 8 9 No. of CD’s Demanded in millions

Confirming the Law of Demand Substitution Effect - -as price goes up, people will buy other products to replace the higher product

Income Effect - -people buy less if the price rises while their income stays the same. **If the price of a product falls, then your real income increases, thus giving you more purchasing power.

Law of Diminishing Marginal Utility - -As a person consumes additional units of a good, eventually the utility gained from each additional unit of the good decreases. Ex: You get the less and Less satisfaction from each glass of lemonade…

**If demand changes for reasons other than price, then a new curve must be drawn. Increase to the right of the old curve. Decrease to the left of the old curve

Non-price Determinants of Demand Number of Buyers Population Tastes and preferences Expectation of buyers

5. Substitutes Income A. Normal Goods—as income goes up, demand for these go up. B. Inferior Goods –as income goes up, demand for these decrease. 7. Complimentary Goods

Demand Elasticity --shows to what extent changes in in price make changes in demand. 2 Kinds of Demand Elasticity 1. Elastic--when a small increase or decrease in price has a great effect on consumer demand. Ex. T-bone steak, movie tickets

2. Inelastic--when a small increase or decrease in price causes only a small change in what the consumer demands. Ex. Gasoline, Insulin

1. Can the purchase be postponed? 2. Are there adequate substitutes? 3 Questions to Ask in Determining Demand Elasticity. 1. Can the purchase be postponed? 2. Are there adequate substitutes? 3. Does the purchase consume a large portion of income? If 2 out of 3 is “yes”--elastic If 2 out of 3 is “no”--inelastic