The amount of a particular good or service consumers want to buy Law of Demand Demand Schedule Price Quantity $50 $40 1 $30 $20 2 $10 3 $5 5 Demand- The amount of a particular good or service consumers want to buy Law of demand- as the price of a good increases the amount demanded will decease and as price decreases then demand will increase Price and amount demanded move in opposite directions PRICE Demand Curve QUANTITY

Diminishing Utility -the law of demand says that a lower price will increase demand but this is limited -diminishing utility -the amount of satisfaction or usefulness of a product decreases as more and more are consumed. You do not want any more no matter how cheap it gets -Ex.—You can only enjoy so many soft drinks before you can’t drink anymore no matter the price you are paying

-Elastic Demand - expensive and luxurious items Elasticity -Elasticity -Is the degree to which a change in price affects the demand for the product -Elastic Demand - expensive and luxurious items -a change in the price does affect the quantity demanded When purchase can be postponed -Inelastic demand -change in the price does NOT affect the quantity demanded Necessities, few substitutes can be found PRICE Elastic Demand QUANTITY PRICE Inelastic Demand QUANTITY

Changes in Demand Changes in demand can come from 6 factors: income changes, changes in the number of consumers, consumer expectations, consumer tastes, and changes in complements and substitutes P R I C E DECREASE in Demand QUANTITY PR I CE INCREASE in Demand QUANTITY

Income Level Changes -The demand of many consumers is based on their income level or purchasing power -A change in either direction to a person’s purchasing power will change their demand for goods and services More income = more money = more willing to spend money -personal income How much money a person makes before taxes -disposable income How much money a person has after taxes are taken

Change in Consumers -The number of possible consumers in an area affects demand -Faster growth areas may face higher levels of demand More consumers = more demand Causes higher prices -Areas of the country who are losing population will face lower demand for goods Less consumers = less demand Causes lower prices Birthrate, migration, immigration

Consumer Expectations -Many consumers plan when making economic choices and their predictions for the future change their demand Planning for marriage, children, college, etc. -a period of high unemployment or economic boom can greatly change the demand for certain goods Do not want to waste money, cannot wait to spend money

Consumer Tastes -Because consumers have many choices of where to spend their money, the popularity of items will change demand People want/willing to pay for what is popular -Advertisers spend billions every year to shape the “tastes” of consumers Make people want product Holiday seasons -Some items become high demand items for a short while and then very little demand “Fads”

ex—chicken price increases, demand for beef increases Substitute Goods -substitute goods are goods that can be used in place of another product ex.—chicken or beef -if a good experiences a price change then the substitute good will face a demand change Price up = demand up ex—chicken price increases, demand for beef increases Chicken and beef are substitute goods, meaning that they can easily be used in the place of one another. If the price for chicken increases, more people will want to buy beef, so the demand for beef will also increase. If the price for chicken decreases, more people will want to buy chicken, so the demand for beef will also decrease.

-complementary goods are goods that work with another product ex-toothbrush and toothpaste, hot dogs and hot dog buns, etc. -a change in the demand for one will many times affect the demand for the other as well Price up = demand down For example: If your parents buy you an Xbox for your birthday, they will probably buy a game to go along with the Xbox. DVDs and DVD players are complementary goods, meaning that they work with another product. If the price of DVDs increases, less people will want to buy DVDs and DVD players, so the demand for DVD players decrease. If the price for DVDs decreases, more people will want to buy DVDs and DVD players, so the demand for DVD players will increase.