1. Markets Chapter 3-5

2. What is a market? markets are places where 1 or more buyers and 1 or more sellers come together ex: swap meet, stock market, grocery store, E-Bay –good is a tangible item [product] that gives a person utility or satisfaction –service is an intangible item that gives a person utility or satisfaction utility = usefulness

3. pictures of markets

4. Markets have 2 parts BuyersDemandBuyers provide the Demand SellersSupplySellers provide the Supply

5. Demand How much will you pay for my ipod? (Reference 3.1)

6. What is demand? Demand- is the willingness and ability to purchase a good or service. –willingness to purchase refers to a persons want or desire for a good –ability to purchase means having the money to pay for the good. You may want something but may not have the ability to pay for it. demandBOTH There is no demand unless BOTH components are there.

7. wants demand

9. The Law of Demand Law of Demand –as the price (P) of a good increases, the quantity demanded (Q D ) of the good decreases –as the price of a good decreases, the quantity demanded increases Quantity Demanded (Q D ) –the number of units of a good purchased at a specific price

10. Inverse Relationship between P and Q D P Q D

11. Why is this true? Costs v. Benefits Analysis Costs Rise –Price is one element of cost Benefits stay the same

12. Why is this true? Law of Demand When price rises, quantity demanded falls When price falls, quantity demanded rises Because... …of the Law of Diminishing Marginal Utility

13. Law of Diminishing Marginal Utility utility = usefulness

14. Economists like to use graphs to represent changes in demand A market can be described by analyzing supply and demand

15. Demand Schedule a numerical chart that shows the law of demand PriceQuantity Demanded $4 $3 $2 $1 12341234 Check out what we did with the ipod… as price falls, demand increases

16. Demand Curve a graphic representation of the law of demand PriceQuantity Demanded $4 $3 $2 $1 12341234 Lets convert the ipod demand schedule to a demand curve.

17. Conduct a poll of your classmates in order to develop a demand schedule and a demand curve Think of a product and a reasonable price range. Ask at least 10 students at what price they would be willing and able to buy that product. Record the info in a demand schedule PriceQuantity demanded Then plot the info on a graph

18. Please read p. 68 A Day at Disneyland… QtoA Can you think of a good or service that is priced the way visits to Disneyland are priced? (For two units of the good or service, you pay less than double what you pay for one unit) This pricing illustrates Disneylands understanding of the Law of Diminishing Marginal Utility the Law of Diminishing Marginal Utility *

19. Homework: please read p. 68 A Day at Disneyland… – QtoA Can you think of a good or service that is priced the way visits to Disneyland are priced? (For two units of the good or service, you pay less than double what you pay for one unit) Section Review (p. 70 ) - #5-7 This pricing illustrates Disneylands understanding of the Law of Diminishing Marginal Utility the Law of Diminishing Marginal Utility *

20. Shifts in Demand Curves Reference 3.2

21. Demand increases DC shifts Right Demand decreases DC shifts left W hat causes demand curves to shift? Shifts in Demand Curves

22. Now the ipod not only has all its original features,but also has all the answers to your homework in a print format How will that change the demand curve? Can you predict other things that might cause a demand curve to shift?

23. What causes demand curves to shift? PreferencesPreferences Number of BuyersNumber of Buyers IncomeIncome Price of Related GoodsPrice of Related Goods Buyers demand more or less of a good at all prices

24. Preferences Fads Styles Change

25. Number of Buyers Population Changes –birth/death rate –migration

26. Income Income may shift demand curve (affects ability) If income increases and… –More of a good is demanded: NORMAL GOOD –Less of the good is demanded: INFERIOR GOOD –Neither more or less of the good is demanded: NEUTRAL GOOD

27. Price of Related Goods 2 types of related goods –Substitutes –Coke for Pepsi »Price increase for Cokedemand increase for Pepsi –Complements –Peanut Butter and Jelly »Price increase for pbdemand decrease for j

28. Caution! Change of Demand (shift of demand curve) IS NOT THE SAME AS Change in Quantity Demanded (change along the line-based only on change in price)

29. Homework: Complete Cheezy Doodle H/O In your spiral, Complete Section Review #5-7, p.70 Complete Section Review Qs #3-6 in spiral. p. 76

30. Fans often complain that athletes get paid too much money and that these higher salaries lead to higher ticket prices. Do you agree or disagree with this statement? –Higher ticket prices lead to lower sales. Why does this happen? Why would they raise ticket prices? If the Chargers sell 20,000 tickets at $25 and only sell 12,000 at $30, which ticket price brings in more total revenue? If players salaries go up from $300,000 to $325,000 per game what price would Chargers sell tickets at? The attendance numbers from above still apply. What do you think might cause ticket prices to go up?