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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.4 12.1 Students understand common terms & concepts and economics reasoning. Standard Address 1 Explain the law of demand Interpret a demand schedule and demand curve 4.1 - Objectives
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© SOUTH-WESTERN
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CONTEMPORARY ECONOMICS: LESSON 4.13 CHAPTER 4 Demand 4.1 4.1The Demand Curve 4.2 4.2Elasticity of Demand 4.3 4.3Changes in Demand
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.14 CHAPTER 4 Demand Why are newspapers sold in vending machines that allow you to take more than one copy? How much do you eat when you can eat all you want? What cures spring fever? What economic principle is behind the saying, “Been there, done that”? Why do higher cigarette taxes cut smoking by teenagers more than by other age groups? Consider
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.15 LESSON 4.1 The Demand Curve demand law of demand marginal utility law of diminishing marginal utility demand curve quantity demanded individual demand market demand Key Terms
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.16 Demand Demand indicates how much of a product consumers are both willing and able to buy at each possible price during a given period, other things remaining constant.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.17 Law of Demand The relation between price and the quantity demanded is an economic law. The law of demand says that quantity demanded varies inversely with price, other things constant. Thus, the higher the price, the smaller the quantity demanded.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.18 Law of Demand Today's topics Demand, wants, and needs Substitution effect Income effect Diminishing marginal utility
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.19 Law of Demand Demand, wants, and needs Consumer demand and consumer wants are not the same thing.
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© SOUTH-WESTERN I might be willing to buy certain things…
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© SOUTH-WESTERN But, am I able to buy them?
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.112 Law of Demand Substitution effect Remember that the change in the relative price – the price of one good relative to the prices of other goods – causes the substitution effect.
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© SOUTH-WESTERN Cereal CONTEMPORARY ECONOMICS: LESSON 4.113
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.114 Law of Demand Income effect Real income – that is, your income measured in terms of how many goods and services it can buy.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.115 Law of Demand Diminishing marginal utility The satisfaction you derive from an additional unit of a product is called your marginal utility.
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© SOUTH-WESTERN The satisfaction you get from a second pizza is your marginal utility of that pizza
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.117 Law of Demand Diminishing marginal utility (Continue) The Law of Diminishing marginal utility – the more of a good a person consumes per period, the smaller the increases in total utility from consuming one more unit, other things constant. The law of diminishing marginal utility helps explain why people buy more when the price decreases.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.118 814202632 Millions of pizzas per week $15 12 9 6 3 0 Price per pizza Demand Curve for Pizza a b c d e D. The schedule lists possible prices, along the quantity demanded at each price.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.119 814202632 Millions of pizzas per week $15 12 9 6 3 0 Price per pizza Demand Curve for Pizza a b c d e D. The demand curves slopes downward, reflecting the Law of Demand – that is, price and quantity demanded are inversely, or negatively, related, other things constant.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.120 Demand Schedule Price Quantity Demanded per Pizza per Week (millions) a$158 b1214 c920 d626 e332
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.121 Explain the law of demand in your own words. ?? Checkpoint Pg. 105
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.122 Demand Schedule and Demand Curve When you describe demand, you must specify the units being measured and the period being considered.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.123 Demand Schedule and Demand Curve Demand versus quantity demanded An individual point on the demand curve shows the quantity demanded. Demand, is not a specific quantity, but the entire relation between price and quantity demanded.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.124 $12 8 4 1 (c) Chris $12 8 4 12 (b) Brianna $12 8 4 Price 123 Pizzas (per week) (a) Hector Individual Demand for Pizzas d H d B d C
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.125 Demand Schedule and Demand Curve Individual demand and market demand The market demand curve shows the total quantity demanded per period by all consumers at various prices. The market demand is simply the sum of the individual curves for all consumers in the market.
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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 4.126 $12 8 4 Price 123 Pizzas (per week) (d) Market demand for pizzas 6 Market Demand for Pizzas d H d B d C D ++=
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