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CHAPTER 5. ECONOMICS DEMAND AND SUPPLY. INTERACTION PRICE AND DEMAND. Demand is set by consumers How are decisions made? CD Example. Willing and Able. Demand-must be willing and able to purchase the item How Much to purchase?

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Chapter 5

CHAPTER 5

ECONOMICS

DEMAND AND SUPPLY


Interaction price and demand
INTERACTION PRICE AND DEMAND

  • Demand is set by consumers

  • How are decisions made?

  • CD Example


Willing and able
Willing and Able

  • Demand-must be willing and able to purchase the item

  • How Much to purchase?

  • Quantity demanded- the amount you are willing and able to buy at a specific price


Demand
Demand

  • Demand is the amount of a good or service that consumers are willing and able to buy at all prices in a give period

  • In a given period-must be measureable

  • Underwood Example


Demand schedules
Demand Schedules

  • Price is very important to consumers

  • Demand schedules and curves are visual representations of consumers demand based on a price

  • In these examples all other variables are considered to be constant


Market demand
MARKET DEMAND

  • Market demand is the sum of all the individual quantities demanded in a market.

  • Most of the time economists refer to market demand

  • Market demand is helpful in planning business needs


Law of demand price increase
LAW OF DEMAND-Price Increase

  • Inverse relationship between price and quantity demanded

  • Price decreases, quantity demanded increases

  • Why?


3 reasons for law of demand
3 Reasons for Law of Demand

  • Law of diminishing marginal utility

  • The Income effect

  • Substitution effect


Change in quantity demanded
Change in Quantity Demanded

  • As consumers buy more or less based on a price change quantity demanded moves along the demand curve in and inverse direction

  • This is known as Change in Quantity Demanded

  • This is only caused by a change in price


Shifts in in demand curves
SHIFTS IN IN DEMAND CURVES

  • Other causes can change the demand-change in demand

  • A change in demand occurs when quantities demanded increase or decrease at all prices

  • These will cause demand curve shifts


Demand shifters
Demand Shifters

  • Changes in Income

  • Changes in number of consumers

  • Changes in consumer tastes and preferences

  • Changes in consumer expectations


Demand shifters1
Demand Shifters

  • Changes in price of substitute good

  • Changes in price of complimentary goods


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