1. A Lesson on Demand

2. What is Demand?
Willing and able to purchase a product at a particular price
How many of you would like a Porsche [or like vehicle]?
How many of you are able?
What’s the difference between willing and able?
Idea of time and place – at this time, you may be willing to buy a Porsche, but are not able, therefore you do not have a “DEMAND” for a Porsche

3. Example: Demand for lolipops
Totals 10 20 30 40 50

4. Demand Schedule
A table that lists at various prices, the number of items demanded
Demand Curve – the graphic representation of demand
Graphing a Demand Schedule:
The lower left quadrant is “0”
The vertical axis is price
The horizontal axis is quantity
Graph the numbers from the Lollipop Demand Schedule

5. Law of Demand
As price falls, the quantity demanded increases. As the price rises, the quantity demanded decreases
P QD
Price per gallon of water
Bottles per week $ Jo
Pat
.74 90 50
.50
130 70
.36
180
100
.28
290

6. Demand Curve for Bottled Water

7. Change in Quantity Demanded vs. Change in Demand
Caused by change in own price of good
Movement along the curve
Change in Demand:
Caused by Change in determinant of demand
Shift to new demand curve

8. Demand Determinants Income
Normal Good: a good for which demand increases as consumer incomes rise (milk)
Inferior Good: A good for which demand decreases as consumer incomes rise (ground chuck, bus rides)
As income rises consumers tend to switch from consuming these inferior goods to consuming normal goods (ex. steak, car/plane)

9. Determinants con’t Preference/Taste Consumer Expectations
Likes and dislikes in consumption
Consumer Expectations
Change in future price of goods
Change in future income
Population Change
As the number of consumers in a market changes the demand will change

10. Determinants con’t Prices of Related Goods
Substitutes: Goods that are related in such a way that an increase in the price of one leads to an increase in the demand for the other [goods that can be consumed in place of one another] (Pepsi and Coke)
Compliments: Goods that are related in such a way that an increase in the price of one leads to a decrease in the demand for the other [goods that are normally consumed together] (hamburgers and french fries)