1. Standard:
Students will examine and analyze economic
concepts such as demand, so that they may
understand the production, distribution, and
consumption of goods and services in our
Capitalistic system.

2. Objective 1:
Use data from charts and graphs to understand
information relevant to the field of Economics.
Objective 2:
Define the key economic concept of demand,
and analyze factors affecting it.

3. Demand
--the willingness and
ability of consumers
to buy goods and
services.
Quantity Demanded
--what people buy at
different prices.

4. Ex. Very few buy pencils at $.50, but many buy at $.05.
Law of Demand – as the price
goes up, the amount demanded
goes down and as price goes down,
demand goes up.
Ex. Very few buy pencils
at $.50, but many buy
at $.05.

5. Demand Schedule--Listing which shows how much is
demanded at certain prices.
Price CD’s demanded
*Economists
study demand
schedules when
looking at the
demand for a
certain product.
$ ,100,000
$ ,000,000
$ ,000,000
$ ,500,000
$ ,800,000
$ ,000,000

6. $ Demand Curve--points plotted on a chart to show demand of a product._
$20 $ 18 16 14 12 10
No. of CD’s Demanded in millions

8. Confirming the Law of Demand
Substitution Effect - -as price
goes up, people will buy other
products to replace the higher
product

9. Income Effect - -people buy
less if the price rises while
their income stays the same.
**If the price of a product falls,
then your real income increases,
thus giving you more
purchasing power.

10. Law of Diminishing
Marginal Utility - -As a person
consumes additional units of a good,
eventually the utility gained from each
additional unit of the good decreases.
Ex: You get the less and
Less satisfaction from
each glass of lemonade…

11. **If demand changes for reasons other
than price, then a new curve must be
drawn.
Increase to
the right of
the old curve.
Decrease to the
left of the old curve

12. Non-price Determinants of Demand
Number of Buyers
Population
Tastes and preferences
Expectation of buyers

13. 5. Substitutes
Income
A. Normal Goods—as income
goes up, demand for these go up.
B. Inferior Goods –as income
goes up, demand for these decrease.
7. Complimentary
Goods

16. Demand Elasticity
--shows to what extent changes in
in price make changes in demand.
2 Kinds of Demand Elasticity
1. Elastic--when a small increase or
decrease in price has a great
effect on consumer demand.
Ex. T-bone steak, movie tickets

17. 2. Inelastic--when a small increase
or decrease in price causes only
a small change in what the
consumer demands.
Ex. Gasoline, Insulin

18. 1. Can the purchase be postponed? 2. Are there adequate substitutes?
3 Questions to Ask in Determining
Demand Elasticity.
1. Can the purchase be postponed?
2. Are there adequate substitutes?
3. Does the purchase consume a
large portion of income?
If 2 out of 3 is “yes”--elastic
If 2 out of 3 is “no”--inelastic