Demand

1. Demand Standard 1.3.2

2. Do Now • What are some of the most influential factors in determining peoples choices?

3. What do you demand? What does that mean the word demand?

4. Do Now • Where is your favorite place to shop for clothes, food etc,. Explain why

5. Demand • Essential Question: How do consumers use the law of demand to respond to changes in market condition?

6. Law of Demand • Law of Demand: Definition… • An Increase price causes decrease in Quantity Demanded • Decrease in price causes an increase in Quantity Demanded

7. Law of Demand • Quantity demanded and price move in opposite direction Price Quantity Goes Demanded h i THE MORE SOMETHING IS, THE LESS PEOPLE CAN BUY

8. Law of Demand Price Quantity Goes Demanded i h THE CHEAPER SOMETHING IS, THE MORE PEOPLE CAN BUY

9. Demand vs. Quantity Demanded • Demand: how many things you would be willing to buy at many difference prices • Quantity Demanded: how many things you would buy at one specific price/time period

10. Do Now • Explain/Describe the law of demand

11. What influences your demand? • What influences your demand? Why does the Law of Demand exist? Three main things… 1. Income Effect 2. The Substitution Effect 3. Diminishing Marginal Utility

12. 1 • Income Effect: any increase or decrease in consumer’s purchasing power caused by change in price • Our resources ($$) is limited so price changes can impact our demand

13. Income Effect… • April 2014, McDonald’s is getting back to basics after a string of disappointing quarterly results in its home market of the United States, which accounts for 30 percent of overall revenue. • The fast-food giant has reported roughly two years of turbulent sales at established U.S. restaurants due to sluggish economic growth, stiffer competition and internal missteps that have complicated menus and slowed service. • Adding to the pressure, higher costs for beef, chicken and labor are squeezing profits because customers are cutting back on visits as McDonald’s raises prices to offset the additional expenses.

14. Which one is better?Which one would you rather buy?Which one can you buy?

15. 2 • Substitution Effect: When customers choose not to buy an expensive thing but buy a cheaper, similar thing instead • Growth of Dollar Stores: “And Dollar General isn’t the only dollar chain to have had success in recent years. Competitors Dollar Tree and Family Dollar have also experienced significant growth in revenue since the 2008 recession, when many consumers began shopping at discount chains for everyday items like cleaning supplies, toiletries and groceries.”

16. Diminishing Marginal Examples… • What decreases as Squidward eats the crabby pattys? • Value of each food item • https://www.youtube.com/watch?v=hlpBw48bgEo • Is demand limitless? • No!

17. 3 • Diminishing Marginal Utility: As more units of a product are consumed, the satisfaction received from consuming each additional unit goes down • Diminish=Go down • Utility= Value

18. Graphing… • What does diminishing utility look like visually by graph? • This is the same way we graph demand

19. Demand Schedule • Do a quick sketch of this chart (A and B only) • Charts!

20. Agenda 3-10-15 • 1. Complete the “Create Your Own Demand Schedule & Graphing Assignment” • Follow directions properly with Law of Demand and examples from notes • 2. Read pages 97-101 from textbook and answer Questions 2-4 at the bottom of your graphing assignment. Use complete sentences • 3. Read the entire article “Bernie Sanders wins Big with Michigan Muslims” AND record just one question or comment you have at the bottom of your graphing assignment

21. Do Now Explain the substitution effect. Squidward eating crabby patties represents what learned concept?

22. Do Now • Describe the substitution effect • What is diminishing marginal utility

24. Law of Demand • **Price is the main variable affecting demand** • Change in price causes a slide on the *same* demand curve

25. Determinants of Demand • Other factors influence demand as well, its not just price • These factors can shift the entire demand curve left or right, instead of simply causing a slide along the old demand curve

26. Determinates of Demand • MAIN IDEA: If demand increases the demand curves moves to the RIGHT

27. Determinates of Demand • MAIN IDEA: If demand decreases the demand curve moves to the LEFT

28. 5 Determinates of Demand 1. Changes in Number of Consumers 2. Changes in Income 3. Changes in Tastes and Preferences 4. Substitutes 5. Complementary Goods

29. Do Now • What is the one thing that will NEVER shift the demand curve? • How did Friday’s cartoon (Futurama) help you understand demand?

30. Determinants of Demand

31. Increase in Number of Consumers The demand curve moves right (increases) when number of consumers grows More people = More Demand

32. Decrease in Number of Consumers The demand curve moves left (decreases) when number of consumers shrinks Less people = Less Demand

33. Changes in Income The demand curve moves right (increases) when Income grows More Money = More Demand

34. Changes in Income The demand curve moves left (decreases) when income shrinks Less Money = Less Demand

35. Changes in Tastes and Preferences The demand curve moves right (increases) when people choose to buy certain items because of fads or popularity More Sales = More Demand

36. Changes in Tastes and Preferences The demand curve moves Left (decreases) when the items becomes less popular. Less Sales = Less Demand

37. Substitutes The demand curve moves right (increases) when the price of a similar item goes up Less Competition = More Demand

38. Substitutes The demand curve moves left (decreases) when the price of similar item goes down More Competition = Less Demand

39. Complementary Goods The demand curve moves right (increases) when the price of a complementary good goes down

40. Complementary Goods The demand curve moves left (decreases) when the price of a complementary good goes up

41. Demand Curve • Demand Curve: goes downward as you move left to rightacross the graph (graph price vs. quantity demanded)

42. Key Point to Remember!! • The price of the product itself will never cause a shift (left/right) in demand. • Only the 5 Determinants will shift the demand curve and create a brand new one.

43. \ What has caused this shift in demand?A. an increase in the price of film B. an increase in the price of cameras C. a decrease in the price of film D. a decrease in the price of cameras

44. Which direction does the Demand Curve Move? Situation: The Ford and Chrysler have just guaranteed a 15% cut in wages for all employees. What will happen to the demand for luxury goods in areas with a lot of auto workers? What determinate are we using?: CHANGE IN INCOME What direction will the Demand Curve move?: LEFT

45. Which direction does the Demand Curve Move? Situation: If Kroger has a great sale on spaghetti sauce, what effect should they expect it to have on spaghetti noodles? What determinate are we using?: COMPLIMENTARY GOODS What direction will the Demand Curve move?: RIGHT

46. DO NOW • What are the determinants of demand? • What is the one thing that will never shift demand?

47. Demand vs. Quantity Demanded What is the difference between a Change in Demand and a Change in Quantity Demanded?

48. “Do Now” (Rubber Band) • As a consumer, how sensitive are you to changes in an increase price? • What are products you would continue to buy after a price increase? • What are products you would stop buying?

49. Price Elasticity of Demand • Main Idea: Elasticity of Demand: measures how much the Quantity Demandedchanges when price goes up or down

50. Elastic Demand Definition: Elastic Demand: Situation in which a given rise or fall in a products price “greatly” affects the amount that people are willing to buy Big Change in Quantity Demanded!