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Demand Section 1 – Nature of Demand

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1 Demand Section 1 – Nature of Demand
Chapter 4 Demand Section 1 – Nature of Demand

2 Quantity Demand The amount of a good or a service that a person is willing and able to buy at each particular price

3 Law of Demand Increase in a goods price causes a decrease in the quantity demanded. A decrease in a goods price causes an increase in the quantity demanded. INVERSE RELATIONSHIP Price Quantity Demanded

4 Income / Substitution Effect
Income Effect – the amount of money, or income, that people have available to spend on goods and services is called their purchasing power. Any increase or decreases in a persons purchasing power caused by change in price is called the income effect. Substitution Effect – the tendency of consumers to substitute a similar, lower priced product for another product. Example – Dr. Pepper and Dr. Skipper

5 Diminishing Marginal Utility
The more units consumed of one item, the amount of satisfaction received declines. A New Car

6 Demand Curve Plots the information on the demand schedule. PRICE
Quantity Demanded

7 Pay attention boys and girls!
Bartz’s Demand Slope Slope = Change in Y / Change in X Pay attention boys and girls!

8 Slope Slope = rise = change in vertical axis = y
run change in horizontal axis x Example - slope = -5 25 What does this mean? If my price is lowered 5 $ then there would be 25 more products demanded by the public.

9 Determinants of Demand
Consumer taste and preferences Potential consumers Money income Complementary and substitute Goods Price Expectations

10 Supply A willingness to sell a product at a certain price
Law of Supply – People will sell more of a product at a higher price than a lower a price.

11 Supply Schedule PRICE AND QUANTITY SUPPLIED ARE DIRECTLY RELATED
As one goes up the other goes up! QS P

12 Supply Curve Plots the information from the supply schedule
Price Q/S

13 Determinants of Supply
Resource Prices Production Technology Labor Productivity Taxes, Subsidies, Regulations

14 Increase in Supply Curve shifts to the right Price Q/S

15 Decrease in Supply Shift to the Left Price Q/S

16 Combine Demand and Supply
Price Market Equilibrium D Quantity

17 Market Equilibrium Point that supply meets demand…
Point that the price is determined… S The supplier should make 1000 and sell the item for 5$ 5 Price D 1000 Quantity


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