12/6 Warm-Up 1.Which economic system includes bartering? 2.In which economic system is the entrepreneur given the incentive to start new businesses and earn profits?

DEMAND DEMAND p. 233 Objective – Describe the determinants of demand through notes and practice examples.

REVIEW… What role does the consumer play in a market economy? Define Consumer Sovereignty …. The ___________________ decides what goods and services are available in the market by what they are willing to ____________. Define Self Interest Motive… Consumers want to buy things at ________ prices.

REVIEW… What role does the consumer play in a market economy? Define Consumer Sovereignty …. The CONSUMER decides what goods and services are available in the market by what they are willing to BUY. Define Self Interest Motive… Consumers want to buy things at LOW prices.

Discuss the economy spectrum… _________________________________________________

DEMAND – think like a consumer! Demand: the desire to own something and the ability to pay for it

DEMAND – think like a consumer! Demand: the desire to own something and the ability to pay for it The Law of Demand states that as prices decrease people are willing to buy more. As price increases people are willing to buy less P D P D (inverse relationship)

Graph the Following Demand Curve Using the Demand Schedule Below Demand Curve: Graphic representation of the demand schedule. y-axis = price x-axis = quantity demanded Price Quantity

Price $ Quantity of DVDs Demanded

Demand Curve Price Qty Price Quantity D

Demand Market Demand Curves Show how people’s buying habits will change at certain prices ONLY Show a specific market only Assume no other factors change (just price)

WHY WOULD THERE BE A SHIFT (change) IN DEMAND?

Consumer’s income changes : As income increases, demand increases. The money you have, the more demand you will have for goods and services.

WHY WOULD THERE BE A SHIFT (change) IN DEMAND? Consumer Expectations: if shortage is expected, demand increases As consumers expect the availability of goods to decline, they will have a higher demand for these goods.

WHY WOULD THERE BE A SHIFT (change) IN DEMAND? Population Size: Population increases, demand increases When there are more people there will be a higher demand for goods and services.

WHY WOULD THERE BE A SHIFT (change) IN DEMAND? Consumer Taste: If a good becomes popular, demand increases As these items became popular, the demand increased.

WHY WOULD THERE BE A SHIFT (change) IN DEMAND? Change in Price of Related Goods: Complements: goods bought together (ex. PB&J) Comp. good price increases, the good’s demand decreases (inverse relationship) Substitutes: goods used in place of one another (ex. skis and snowboards) If a substitute price increases, the good’s demand increases (direct relationship)

Elasticity of Demand ELASTICITY of DEMAND: How much the quantity demanded will change if the price rises or falls. ELASTIC DEMAND: demand that is very sensitive to a change in price goods that one might stop buying or cut back on as price increased (SUVs, Luxury items)**on a graph this demand curve will be FLAT

Elasticity of Demand INELASTIC DEMAND: demand that is not very sensitive to a change in price goods that you would buy at any price; there are few if any substitutes for these goods. (milk, gas, prescription drugs) **on a graph this demand curve would be very steep.

Practice Graphing Demand p. 234

Graphing Demand At a price of $1.00, the quantity demanded of slices of pizza is _____10_______. At a price of $3.50, the quantity demanded of slices of pizza is __2___________. Is this a shift in the demand curve or a movement along the demand curve? Movement along the curve – only price is changing in the first graph

Graphing Demand Price $ Quantity of Pizza Demanded D2 D1 Shift Shift to the left – demand is decreasing

Graphing Demand a.Is the change in demand, due to the price of hamburgers, a shift in the demand curve or a movement along the demand curve? Shift b. Has the demand for slices of pizza increased or decreased? decreased Are these examples going to cause a movement along the curve or a shift in the demand curve?

Graphing Demand In these circumstances, tell if the demand for a slice of pizza would increase or decrease. CHANGE RESULT IN DEMAND Consumers make more money Increase / Decrease Hot dog prices increase Increase / Decrease Nacho prices decrease Increase / Decrease The popularity of eating pizza for Increase / Decrease lunch increases Over-priced drinks are served Increase / Decrease at the pizza stand Are these examples going to cause a movement along the curve or a shift in the demand curve? SHIFT

Graphing Demand Are the prices for these goods elastic or inelastic? Write an “e” for elastic and an “i” for inelastic. ______ a. Cars______ h. Butter ______ b. Candy bars______ i. CD ______ c. Medicine ______ j. Roses on Valentines Day ______ d. Pepsi ______ k. Electricity ______ e. Movie Ticket ______ f. Turkey on Thanksgiving ______ g. Television

Demand Scenarios- Classwork Reading Guide Homework Describe a situation: 1.Where you would see inelastic demand ex. I have inelastic demand for medicine for my cat, because I love her and will buy her medicine even if it’s very expensive. 2. Where you would see elastic demand 3. Where you would get movement on the demand curve ex. I usually only buy 1 bag of chips, but they were on sale so I bought 2. This is movement on the demand curve. 4. Where you would see a shift to the right for the demand curve (give 2 examples) 5. Where you would see a shift to the left for the demand curve (give 2 examples)

Homework 21.3 and 21.4, pages 232