Chapter 3: Demand. Mr. Mattingly Economics

Transcription

1 Chapter 3: Demand Mr. Mattingly Economics

2 What is demand? Demand = amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time period Two Conditions to Study: Willing and Able Specific Time Period Make sure demand lasts Law of Demand: Price (P) goes up, Quantity Demanded (QD) goes down P goes down, Quantity Demanded goes up

3 Explaining the Law of Demand: Income Effect: Purchasing Power = amount of money people have to buy goods or services Ex: store sales increase purchasing power Substitution Effect: Substitution Effect = tendency to substitute a similar, lower-priced product Not all products have substitutes EX: Oil Diminishing Marginal Utility (DMU): DMU = utility increases with consumption but satisfaction declines with consumption Utility = usefulness EX: Eating till you re stuffed

4 Diminishing Marginal Utility: At Work

5 Demonstrating Demand: Visuals Demand Schedule = table format showing price & quantity demanded Demand Curves = graph showing the relationship of price & quantity demanded Plot the graph based on the demand schedule Graphing Demand Curves: Price Change Move along the curve if price changes Can demand change if price remains the same?

6 Video Clip: Demand Overview

7 Economic Lesson: Demand Demand can change without a price change. Increased Demand = shift right Decreased Demand = shift left Five Non-Price Determinants of Demand: Shift the Curve Consumer Taste and Preference (like?) Market Size (people?) Income (money?) Price of Related Goods Substitutes and Compliments Consumer Expectations (future?)

8 Keynote Design: Demand Situations Objective: Build a keynote that quizzes you on real-life demand scenarios. Simulate Test Questions Keynote Guidelines: Title Slide + Law of Demand and Determinants Slide + 8 Different Scenarios Must use each of the five non-price determinants of demand once. Follow Template Format Slide and Bullet Transitions Value: 20 Points Due

9 Demand: Scenario #1 After celebrating 80 s Day for Ki-Yi Week, Zubaz pants become the most popularity clothing item at Watertown High School. Non-Price Determinant of Demand: Consumer Taste and Preference Key Word: Popular Demand Curve for Zubaz Pants: Shift Demand Curve to the Right

10 Demand: Scenario #2 It s Super Bowl week, and Hy-Vee runs a sale on chunky salsa. Hy- Vee also places tortilla chips next to the chunky salsa on the shelf. Non-Price Determinant of Demand: Price of Related Goods (compliments) Key Words: Sale with Two Products Demand Curves for the Salsa and Chips: Salsa: Move along the curve (price change) Chips: Shift Demand Curve to the Right

11 Demand: Scenario #3 Today is the birthday of Dr. Butts, so he decides to change the price of every beverage vending machine in the cafeteria to a quarter. Non-Price Determinant of Demand: None (Price Change - Law of Demand) Key Words: Price Change Demand Curve for WHS Beverages: Move Along the Curve (Price Decreases the Quantity Demanded Increases)

12 Demand Quiz #1: True or False 1. In economic terms, demand occurs when an individual is willing to purchase a product. 2. The income effect is one way to explain the Law of Demand by looking at the purchasing power of a consumer. 3. If there is a price change for a product, the demand curve for that product will be shifted to the right. 4. The only way to change the demand for a good or service is to change the price for that good or service. 5. A demand schedule is a table format that shows the price and quantity demanded for a product. 6. The substitution effect explains the Law of Demand by looking at complimentary goods. 7. A decrease in demand based on one of the five non-price determinant would shift the demand curve to the left. 8. Demand for a product changes based on a specific time period.

13 Demand Quiz #1: Fill-in-the- 9. What does the Law of Demand state? 10.What does the Law of Demand state? 11.Name the five Non-Price Determinants of Demand? 12.Name the five Non-Price Determinants of Demand? 13.Name the five Non-Price Determinants of Demand? 14.Name the five Non-Price Determinants of Demand? 15.Name the five Non-Price Determinants of Demand?

14 Elasticity of Demand: Elasticity = degree to which a good s price affects the quantity demanded If price changes, how much does demand change? Types of Demand Elasticity: Elastic = small change in price causes a major, opposite change in quantity demanded EX: Small price increase causes a significant decrease in quantity demanded Inelastic = change in price has little impact on the quantity demanded amount

15 Elastic vs. Inelastic Products: Elastic Products: are not a necessity have readily available substitutes product s cost represents a large portion of the consumer s income Inelastic Products: are a necessity have few or no readily available substitutes product s cost represents a small portion of the consumer s income * Does not always meet all three descriptions.

16 Discussion: Black Friday... Good or Bad?