1. The Law of Demand

2. Supply and Demand

3. Definition of Demand
The desire to have some good or service and the ability to pay for it.

4. Law of Demand
States that when prices go down, quantity demanded increases. When prices go up, quantity demanded decreases.

5. *Demand Schedule vs. Market Demand Schedule
Demand Schedule- a listing of how much of an item an individual is willing to purchase at each price.
Market Demand Schedule- a listing of how much of an item all consumers are willing to purchase at each price.

6. Law of Diminishing Marginal Utility
States that the marginal benefit of using each additional unit of a product during a given period will decline.
Ex: Glasses of lemonade on a hot day.

7. *Substitution effect
The pattern of behavior that occurs when consumers react to a change in the price of a good or service by buying a substitute product- one whose price has not changed and that offers a better relative value.
Example: Paperback books and magazines.

8. Elasticity of Demand
Elasticity of demand is the measurement of how responsive consumers are to price changes.
Elastic- if the quantity demanded changes significantly
Inelastic- if the quantity demanded changes little

9. Inferior Goods vs. Normal Goods
Inferior Goods are goods that consumers demand less of when their incomes rise.
Ex: Discount clothing, used books, and generic food products.
Normal Goods are goods that consumers demand more of when their incomes rise.

10. What causes demand change?
Income- increased income means consumers can buy more.
Market Size- A growing market usually increases demand.
Consumer Tastes- The popularity of a good or service has a strong effect on the demand for it.
Consumer Expectations- What you expect prices to do in the future can influence your buying habits today.

11. Substitutes & Complements
Substitutes are goods and services that can be used in place of each other.
Hardback books vs. Paperback books
Complements are goods that are used together, so a rise in demand for one increases the demand for the other.
CDs and CD players

12. *What causes a change in Demand?
Complements- when the use of one product increases the use of another product.
Substitutes- Goods and services that can be used instead of other goods and services.

13. Crash Course 1/2

14. Demand Activity
Partner Up!
Turn to page 113

15. Demand Activity Instructions
Each group of students will have 2 factors that cause a change in demand.
Groups will brainstorm scenarios that show how their factors affect the demand for their product(s). Groups can illustrate their ideas in a form such as pictures, cartoons, or diagrams.
Be sure to provide text that explains what you drew and why you chose to draw it.