By: Chloe, Ariel, and Emily Chapter 4: Demand By: Chloe, Ariel, and Emily

Section 1 Vocab Demand: Combination of desire, ability, and willingness to buy and product. Microeconomics: Part of economics that studies small units, such as individuals and firms. Market Economy: Economic system in which people and firms make all economic decisions. Demand Schedule: A table that lists how much of a product consumers will buy at all possible prices.

Cont. Demand Curve: A curve that shows the quantities all at all possible prices. Law of Demand: rule stating that consumers that will buy more of a product at lower prices. Market Demand Curve: A curve that shows how much of a product all consumers will buy at all possible prices. Diminishing Marginal Utility: Decrease in satisfaction or usefulness from having one more unit of the same product.

Cont. Marginal Utility: Additional satisfaction or usefulness a consumer gets from having one more unit of a product.

Demand Demand is the utility for a good or service of an economic agent, relative to his/her income. This is different from the quantity of something demanded. The quantity demanded is a list or graph of a quantity demanded at all of the possible prices.

*Insert Image here* Will Willingness Desire

Section 2 Vocabulary Change in Quantity Demanded:Movement along the demand curve showing that a different quantity is purchased in response to a change in price. Income Effect:That portion of a change in quantity demanded caused by a change in a consumer’s real income when the price of a product changes. Substitution Effect: That portion of a change in quantity demanded due to a change in the relative price of the product that makes other products more or less costly.

Cont. Change in Demand: Shift of the demand curve when people buy different amounts out every price. Substitutes:Competing products that can be used in place of one another, products related in such a way that an increase in the price of one increases the demand for the other. Complements: Products that increase the use of other products; products related in such a way that an increase

Someone recently got a promotion and therefore have more available money to spend Disposable Income Increase of demand shift Prices differ depending on the time of year all the time, mainly around the holidays Increase in future price expectation Expectations of future prices

Income Shifting Taste Consumer Preferences Expectation of Future Number of Buyers Price of Related Goods

Case Study Netflix and Blockbuster Battle It out

Law of Demand The law states that if the price for a good or service increases, the demand for it decreases. Example: If the New IPhone’s price increases than what it is now, the demand for it will decrease.

Section 3 Vocabulary Elasticity: A measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as a price. Demand Elasticity: A measure of responsiveness that shows how a change in quantity demanded (dependent variable) responds to a change in price (independent variable). Elastic: Type of elastic where the percentage change in the independent variable (usually price) causes a more than proportionate change in the dependent variable (usually quantity demanded or supplied).

Cont. Inelastic: Type of elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied). Unit Elastic: Elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied).

Not enough of a demand A high demand Not enough of the product/too much

Demand and Marginal Utility A law of economics stating that as a person increases consumption of a product, while keeping consumption of other products constant, there is a decline in the marginal utility(or satisfaction) that person gets when consuming each additional unit of that product.

Demand Curves As prices go up, demand goes down.

Factors Affecting Demand Change in price: A change in price causes a Movement along the Demand Curve. A shift to the right in the demand curve can occur for a number of reasons: Income, Quality, Advertising, Substitutes, and weather. Expectations of future price increases. A commodity like gold may be bought due to speculative reasons; if you think it might go up in the future, you will buy now.

Elasticity of Demand A measure of the relationship between a change in the quantity demand of a certain good and a change in the price. Price Elasticity of Demand= %Change in Quantity Demanded/ %Change in Price. If the change is small is followed by a large change, the product is elastic(or it responds well to the change). But if the change is large followed by a small change the product is inelastic.