2 DemandThe desire to own something, the ability to pay for it, and the willingness to purchase it.Each individual point on a demand curve is a quantity demanded. The whole curve is DemandPriceQuantity
3 Changes in Quantity Demanded We hold all other factors affecting your buying habits constant (Ceteris paribus).We then look at how consumers react to changes in prices.This is shown graphically by a movement along the curve to a different quantity.
4 The Law of Demand The Law of Demand says that: when a good’s price is lower, consumers will buy larger quantities.when a good’s price is higher, consumers will buy smaller quantities.
5 Increase in Quantity Demanded $3.00$2.50$2.00$1.50$1.00$.50.Price.
6 Decrease in Quantity Demanded $3.00$2.50$2.00$1.50$1.00$.50.Price.
7 Quantity demanded goes up. The Law of DemandAs prices go down…….Quantity demanded goes up.
8 Quantity demanded goes down. The Law of DemandQuantity demanded goes down.As prices go up…….
9 Law of Demand Explained Law of Demand is a result of two behavior patterns:The substitution effectThe income effect
10 The Substitution Effect Consumers react to an increase in a good’s price by consuming less quantities of that good and more of other goods.Example: As the price of beef goes up, people will purchase more chicken.
11 The Income EffectThe change in consumption resulting from a change in purchasing power.Higher price decrease our purchasing power, decreasing the quantities that we buy.Example: $2.50 a gallon gas compared to $3.50 a gallon gas
12 Demand SchedulesA table that lists the quantity of a good consumers will buy at each and every price in the market.
13 Individual versus Market Demand Schedules chart that lists the quantity of a good an individual consumer will buychart that lists the quantity of a good all consumers in a market will buy.
14 Example of a Demand Schedule Demand Schedules for PizzaIndividual Demand ScheduleMarket Demand SchedulePrice per sliceQuantity Demanded per day$.50$1.00$1.50$2.00$2.50$3.005432130025020015010050
15 Example of a Demand Schedule Demand Schedules for PizzaIndividual Demand ScheduleMarket Demand SchedulePrice per sliceQuantity Demanded per day$.50$1.00$1.50$2.00$2.50$3.005432130025020015010050
16 Demand Curves A graphical representation of the demand schedule. Each price is plotted on the vertical axis and each quantity is plotted on the horizontal axis.
21 Facts about a Demand Curve Shows the relationship between the price of the good and the quantity a person will purchase of that good.The curve slopes downward to the right. (Inverse relationship)Assumes other factors remain constant. (quality of the good, consumer incomes, prices of other goods)
22 Section 1 Assignment Ch. 4 Demand Section 1 Questions Key Concept Questions pp. 79, 80, 81, 82, and 83Section Review Question p. 83 #6
23 Section 2 Shifts of the Demand Curve Chapter 4 DemandSection 2Shifts of the Demand Curve
24 Changes in DemandWe allow factors other than price to change (no Ceteris paribus).Consumers buy a different quantity than before at all prices.This is shown graphically by a shift of the demand curve to a new position.