1. A Microeconomics Topic
DEMAND
A Microeconomics Topic

2. Factors that Determine Demand
Desire: Do I want it?
Ability: Can I afford it?
Willingness: Am I willing to buy it?

3. Showing Demand
Demand Schedule: listing of various quantities of a good demanded at all prices in the market at one time
Demand Curve: A graph showing schedule

5. Law of Demand
Quantity of a good demanded varies inversely with its price
Higher price = Lower quantity demanded
Lower price = Higher quantity demanded

6. Marginal Utility Margin, marginal always mean CHANGE
Utility means usefulness/satisfaction
Marginal utility: amount of additional satisfaction you get from each additional unit of a good
Law of diminishing marginal utility: As you consume more of something you get less added satisfaction from each unit decreasing demand

7. Factors Affecting Quantity Demanded
Change in QUANTITY demanded- the market has not changed- no new demand curve
Change in Price Change in QUANTITY demanded

8. Change in Quantity Demanded

9. Factors Affecting Demand
Change in DEMAND-the market has changed- NEW demand curve (the demand curve has “shifted”) at ALL prices there will be a NEW quantity demanded
Consumer income
Consumer tastes
Substitutes’ prices
Complements’ prices
Consumer expectations
Number of consumers changes

10. Change in Demand

11. Section 3-5 Demand Elasticity
Elasticity measures how sensitive consumers are to price changes. 
Demand is elastic when a change in price causes a large change in demand. 
Demand is inelastic when a change in price causes a small change in demand. 
Demand is unit elastic when a change in price causes a proportional change in demand.
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12. Section 3-9 The Total Expenditures Test
Price times quantity demanded equals total expenditures. 
Changes in expenditures depend on the elasticity of a demand curve—if the change in price and expenditures move in opposite directions on the curve, the demand is elastic, if they move in the same direction, the demand is inelastic; if there is no change in expenditures, demand is unit elastic. 
Understanding the relationship between elasticity and profits can help producers effectively price their products.
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13. Section 3-9
The Total Expenditures Test (cont.)

14. Section 3-14 Determinants of Demand Elasticity
Demand is elastic if the answer to the following questions are “yes”. 
Can the purchase be delayed? Some purchases cannot be delayed, regardless of price changes. 
Are adequate substitutes available? Price changes can cause consumers to substitute on product for a similar product.
Does the purchase use a large portion of income? Demand elasticity can increase when a product commands a large portion of a consumer’s income.
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15. Section 3-15
Determinants of Demand Elasticity (cont.)

16. SUPPLY

17. Supply
The amount of output that producers are willing to bring to market at each and every price
Law of Supply: Higher priceHigher quantity supplied; Lower priceLower quantity supplied

19. A change in quantity supplied is the change in amount offered for sale in response to a change in price.
Producers have the freedom, if prices fall too low, to slow or stop production or leave the market completely. If the price rises, the producer can step up production levels.

20. Changes in Supply
Change in supply means at ALL prices there are different quantities supplied
Causes of change in supply
Change in cost of inputs
New technology
Producer expectations
Government Actions
Taxes
Regulations
Subsidies

21. A change in supply is when suppliers offer different amounts of products for sale at all possible prices in the market.

22. Elastic Types