Splash Screen

Section 1: What is Demand? Section 2: Factors Affecting Demand Chapter Introduction Section 1: What is Demand? Section 2: Factors Affecting Demand Section 3: Elasticity of Demand Visual Summary Chapter Menu

Think about the items you bought during the past two months Think about the items you bought during the past two months. What influenced your purchases? Did you need the items, or did you buy them because you wanted them? Make a list of the items, and next to each one write why you bought it. Then add for each item whether you would have bought more if the price had been lower, or fewer had the price been higher. Read Chapter 4 to learn how economists interpret your actions. Chapter Intro 1

Markets exist when buyers and sellers interact, and market prices are set by the interaction of demand and supply. Chapter Intro 2

Chapter Intro-End

Section Preview In this section, you will learn that you express demand for a product when you are willing and able to purchase it. Section 1-Preview

Content Vocabulary Academic Vocabulary demand microeconomics market economy demand schedule demand curve Law of Demand market demand curve Academic Vocabulary marginal utility diminishing marginal utility Section 1-Key Terms

Do you know how the price of an item is established? A. Definitely B. Possibly C. Definitely not A B C Section 1

What is Demand? Demand for a product is more than having the desire to own an item. Demand includes the ability and willingness to pay for it. Section 1

An Introduction to Demand Demand is a concept specifying the different quantities of an item that will be bought at different prices. Section 1

An Introduction to Demand (cont.) Demand is central to a market economy. Demand involves two variables: Price Quantity of a specific product at a given point in time The Demand for Compact Digital Discs Section 1

The Law of Demand (cont.) Higher prices are associated with smaller amounts demanded on most goods or services we buy. This is the Law of Demand. Quantity demanded varies inversely with its price. The market demand curve shows quantities demanded by everyone in the market who is interested in the product/service. Individual and Market Demand Curves Section 1

An Introduction to Demand (cont.) A demand schedule shows the various quantities demanded of a good at all prices that might prevail in the market at a given time. A demand schedule shown graphically is a demand curve. The Demand for Compact Digital Discs Section 1

Which does the demand schedule show? A. Age demographic of buyers B. Various quantities demanded C. Prevailing market prices D. Cost of producing product A B C D Section 1

Demand and Marginal Utility As we buy more of an item, we get less satisfaction from each additional purchase. Section 1

Demand and Marginal Utility (cont.) Utility is the amount of product satisfaction or usefulness one receives from its use. As we use more of a product, we encounter diminishing marginal utility. Section 1

Can you name any products/services that do not have diminishing marginal utility? A. Many B. Some C. Not at all A B C Section 1

Section 1-End

Section Preview In this section, you will learn about the factors that cause changes in demand. Section 2-Preview

Content Vocabulary Academic Vocabulary change in quantity demanded income effect substitution effect change in demand substitutes complements Academic Vocabulary principle illustrated Section 2-Key Terms

Do you think that changes in season affect demand? A. Definitely B. Possibly C. Not at all A B C Section 2

Change in the Quantity Demanded Only a change in price can cause a change in quantity demanded. Section 2

Change in the Quantity Demanded (cont.) When only the price changes and all else remains constant, there is a change in the quantity demanded. Income effect Substitution effect A change in quantity demanded is a movement along the original demand curve. Change in the Quantity Demanded Section 2

Is the buyer’s “real income” really changing when a price changes? A. Absolutely B. Sometimes C. Not at all A B C Section 2

Change in Demand Several factors can cause the demand curve to shift. Section 2

Change in Demand (cont.) Factors other than price can cause a change in demand. A change in demand results in an entirely new demand curve. Change in Demand Section 2

Change in Demand (cont.) Factors for demand changes Consumer income Consumer tastes Price of related goods Substitutes Complements Change in Demand Section 2

Change in Demand (cont.) Expectations Number of consumers Change in Demand Section 2

When consumers are willing to buy more due to an expected future shortage, what happens to the demand curve? A. Demand increases, movement along demand curve slopes downward B. Demand increases, curve shifts right C. Demand increases, movement along demand curve slopes upward D. Demand increases, curve shifts left A B C D Section 2

Section 2-End

Section Preview In this section you will learn about the factors that influence the size of a change in quantity demanded. Section 3-Preview

Content Vocabulary Academic Vocabulary elasticity demand elasticity inelastic unit elastic Academic Vocabulary technical adequate Section 3-Key Terms

A. Revenue will increase B. Revenue will decrease What happens to a farmer’s revenue if he or she raises the price of his or her watermelons? A. Revenue will increase B. Revenue will decrease C. Revenue will stay the same A B C Section 3

Elasticity of Demand An important cause-and-effect relationship in economics is elasticity. Profiles in Economics: Oprah Winfrey Section 3

Demand Elasticity When the price of an item changes, the change in quantity demanded can vary a little or a lot. Section 3

Demand Elasticity (cont.) Consumers react to changes in price by changing the quantity demanded. The size of the reaction is demand elasticity. Demand can be Elastic—Usually wants, insulin Inelastic—Usually needs, or things that are cheap, i.e. table salt Unit elastic Demand Elasticity and the Total Expenditures Test Section 3

If a given change in price causes a proportional change in quantity demanded, the demand is what? A. Inelastic B. Unit elastic C. Elastic A B C Section 3

Is the demand for automobiles— A. Elastic? B. Inelastic? C. Unit elastic? A B C Section 3

Determinants of Demand Elasticity The answers to three questions help determine a product’s demand elasticity. Section 3

Determinants of Demand Elasticity (cont.) Must answer three questions to determine if a demand for a good is elastic or inelastic. Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income? Determinants of Demand Elasticity Section 3

Is the purchase of a prom dress or tuxedo— A. Elastic? B. Inelastic? C. Unit elastic? A B C Section 3

Section 3-End

Law of Demand The Law of Demand states that when the price goes up, quantity demanded goes down. When the price goes down, quantity demanded goes up. VS 1

Change in Demand When a change in demand occurs, people want to buy different amounts of a product at the same price. A change in demand can happen for several reasons. VS 2

Demand and Elasticity Changes in price and total expenditures help determine the demand elasticity of a product. VS 3

VS-End

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Oprah Winfrey (1954– ) first woman in history to produce and own her own talk show first African American woman—and third woman in history—​to own a major television and film studio Profile

DFS Trans 1

DFS Trans 2

DFS Trans 3

demand combination of desire, ability, and willingness to buy a product Vocab1

microeconomics part of economics that studies small units, such as individuals and firms Vocab2

market economy economic system in which people and firms make all economic decisions Vocab3

demand schedule a table that lists how much of a product consumers will buy at all possible prices Vocab4

demand curve a curve that shows the quantities demanded at all possible prices Vocab5

Law of Demand rule stating that consumers will buy more of a product at lower prices and less at higher prices Vocab6

market demand curve a curve that shows how much of a product all consumers will buy at all possible prices Vocab7

marginal utility additional satisfaction or usefulness a consumer gets from having one more unit of the same product Vocab8

diminishing marginal utility decrease in satisfaction or usefulness from having one more unit of the same product Vocab9

prevail to predominate Vocab10

inversely in the opposite way Vocab11

change in quantity demanded movement along the demand curve showing that the amount someone is willing to purchase changes when the price changes Vocab12

income effect that part of a change in quantity demanded due to a change in the buyer’s real income when a price changes Vocab13

substitution effect that part of a change in quantity demanded due to a price change that makes other products more or less costly Vocab14

change in demand shift of the demand curve when people by different amounts at every price Vocab15

substitutes competing products that can be used in place of one another Vocab16

complements products that increase the use of other products Vocab17

principle a fundamental law or idea Vocab18

illustrated shown with an image Vocab19

elasticity a measure of responsiveness that shows how one variable responds to a change in another variable Vocab20

demand elasticity a measure that shows how a change in quantity demanded responds to a change in price Vocab21

elastic type of elasticity where a change in price causes a relatively larger change in quantity demanded Vocab22

inelastic type of elasticity where a change in price causes a relatively smaller change in quantity demanded Vocab23

unit elastic type of elasticity where a change in price causes a proportional change in quantity demanded Vocab24

technical related to a particular subject such as art, science, or trade Vocab25

adequate just enough to satisfy a requirement Vocab26

To use this Presentation Plus! product: Click the Forward button to go to the next slide. Click the Previous button to return to the previous slide. Click the Home button to return to the Chapter Menu. Click the Transparency button from the Chapter Menu, Chapter Introduction, or Visual Summary slides to access the Economic Concepts transparencies that are relevant to this chapter. From within a section, click on this button to access the relevant Daily Focus Skills Transparency. Click the Return button in a feature to return to the main presentation. Click the Economics Online button to access online textbook features. Click the Reference Atlas button to access the Interactive Reference Atlas. Click the Exit button or press the Escape key [Esc] to end the chapter slide show. Click the Help button to access this screen. Links to Presentation Plus! features such as Graphs in Motion, Charts in Motion, and figures from your textbook are located at the bottom of relevant screens. Help

This slide is intentionally blank. End of Custom Shows