Demand Demand vs. Effective Demand Starting a business - What next?

Demand Market Demand Schedule - Personal Demand Schedule Demand is measured by sales volume Personal Demand Schedule

Demand Schedule for widgets in City Price per widget Number of widgets demanded $ 65 10 $ 60 20 $ 55 35 $ 50 55 $ 45 80 $ 40 110 $ 35 145 $ 30 185 $ 25 230 $ 20 280 $ 15 335 $ 10 495

Demand Curve $ 65 $ 60 $ 55 $ 50 $ 45 $ 40 $ 35 $ 30 $ 25 $ 20 $ 15 $ 10 50 100 150 200 250 300 350 400 450 500

Analyzing Demand Demand Curve- graphic representation Law of Demand – Demand varies inversely with price

Change in Demand Demand Curve Slopes downward Income Effect – Substitution effect -

Change in Demand Shift in Demand (new demand curve) Changes in consumer income Consumer Tastes Prices of related goods Substitutes - Complements -

Marginal Utility Marginal – extra Utility – satisfaction/ Function Marginal Utility – Principle of Diminishing Marginal Utility

Stretch your Demand Elasticity of Demand Elastic Demand Inelastic Demand

Total Receipts Test Revenue – total receipts Revenues Prices = Inelastic Revenues Prices = elastic No change in Revenue = unit elastic

Elastic Inelstic $ $ $3 $2 $1 1 2 3 4 $3 $2 $1 1 2 3 4 Quantity

Elastic or Inelastic Determinants of Elasticity Can the purchase be delayed? examples Adequate substitutes? Purchase uses large portion of income?

Exceptions to Law of Demand Paradoxical Demand Curve Personalization Fallacy Time Period Misunderstanding Prestige Purchases