1. Demand CHAPTER 3 SECTION 1: Nature of Demand
Holt Economics
4/20/2017
CHAPTER 3
Demand
SECTION 1: Nature of Demand
SECTION 2: Changes in Demand
SECTION 3: Elasticity of Demand
Chapter 3

2. Objectives: Nature of Demand SECTION 1
How does demand differ from the quantity demanded?
What does the law of demand state?
What do demand schedules and demand curves illustrate?

3. Difference between demand and the quantity demanded:
SECTION 1
Nature of Demand
Difference between demand and the quantity demanded:
demand—consumer demand at various prices
quantity demanded—consumer demand at each particular price

4. Law of demand: Nature of Demand SECTION 1
There is an inverse relationship between a product’s price and the quantity demanded.

5. What demand schedules and demand curves illustrate:
SECTION 1
Nature of Demand
What demand schedules and demand curves illustrate:
Demand schedules show in table format
the quantity of products consumers are willing to buy at a series of possible prices
the quantity of products consumers are able to buy at a series of possible prices
Demand curves show in graph format
the data listed in demand schedules
the rate of change for demand at each price

6. Objectives: Changes in Demand SECTION 2
What does it mean for a product’s demand to shift?
What factors can shift demand for a product?
How do substitute goods differ from complementary goods?

7. SECTION 2
Changes in Demand
When a product’s demand shifts, different quantities of a product are demanded at each and every price.

8. Determinants of product demand shifts:
SECTION 2
Changes in Demand
Determinants of product demand shifts:
consumer tastes and preferences
market size
income
prices of related goods
consumer expectations

9. Difference between substitute goods and complementary goods:
SECTION 2
Changes in Demand
Difference between substitute goods and complementary goods:
substitute goods—used to replace the purchase of similar goods when prices increase
complementary goods—commonly used with other goods

10. Objectives: Elasticity of Demand SECTION 3 What is demand elasticity?
What is the difference between elastic and inelastic demand?
How is demand elasticity measured?

11. SECTION 3
Elasticity of Demand
Demand elasticity reflects the extent to which changes in a product’s price affect the quantity demanded by consumers.

12. Difference between elastic and inelastic demand:
SECTION 3
Elasticity of Demand
Difference between elastic and inelastic demand:
elastic demand—when a small change in a product’s price results in a significant change in the quantity demanded
inelastic demand—when a change in a product’s price has only a slight effect on the quantity demanded

13. Demand elasticity is measured by using the total-revenue test.
SECTION 3
Elasticity of Demand
Demand elasticity is measured by using the total-revenue test.

14. CHAPTER 3
Wrap-Up
1. State the law of demand in your own words. Be sure to include how the income effect, the substitution effect, and diminishing marginal utility relate to the law of demand.
2. What causes movement along a demand curve—in other words, a change in the quantity demanded? How does this movement differ from a shift in demand?

15. CHAPTER 3
Wrap-Up
3. What is the difference between a complementary good and a substitute good? Give an example of each kind of good for each of these products: ice cream, baseball game tickets, pencils.
4. Why is determining demand elasticity important to business owners? How can business owners measure demand elasticity?