Demand

Law of Demand Demand- the amount of goods or services that a consumer is willing to buy at a specific price at a specific time Law of Demand – an increase in price causes a decrease in overall demand Purchasing Power- how much an individual has to spend- also influenced demand- called income effect

Demand Schedule of Ice Cream A table or chart listing the number of people willing to purchase good or service at a specific price Price $3.00 $2.50 $2.00 $1.50 $1.00 $.50 Quantity Demanded 100 200 300 400 500 600

Demand Curve –graphical representation of a demand schedule Demand Curve –graphical representation of a demand schedule. The curve always slopes downward to the left P 3.00 2.50 2.00 1.50 1.00 .50 Q 100 200 300 400 500 600

Determinants of Demand Causes the demand curve to shift either to the left or right Changes in Consumer Preferences or Tastes Market size- either increases or decreases Income – a person gets a raise or is laid off Prices of related goods-either substitute goods or complementary Consumer expectations- expect to lose a job or get a raise or expect a downturn in the economy

Substitute effect When consumers can substitute a cheaper good for a more expensive good they usually will Substitute goods- goods that can easily be replaced by another ex. Coffee for tea Complementary goods – goods that are usually sold together – ex. Tea= lemon, honey if price of one goes up demand goes down for the other good as well

Law of Diminishing Utility Utility- the amount of satisfaction gained from consuming a product Law says the more of a product you consume, the less utility you get from a good, effects demand because producers must capitalize on utility

Elastic Demand When a small change in price causes of major shift in quantity demanded P Demand for Pizza 20.00 15.00 10.00 5.00 Q 100 200 300 400 500 600

Inelastic Demand When a change in price does not have a large effect on quantity demanded P Demand for gasoline in thousands 3.00 2.50 2.00 1.50 1.00 Q 10 20 30 40 50 60