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Demand!

Demand!. Standards. SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.

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Demand!

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  1. Demand!

  2. Standards • SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. • SSEMI2 The student will explain how the Law of Demand, the Law of Supply, prices, and profits work to determine production and distribution in a market economy. a. Define the Law of Supply and the Law of Demand. b. Describe the role of buyers and sellers in determining market clearing price. c. Illustrate on a graph how supply and demand determine equilibrium price and quantity. d. Explain how prices serve as incentives in a market economy.

  3. Standards SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand.

  4. Market Economy • Circular Flow shows that businesses use factors of production bought from Households to create goods or provide services. • How do they know which goods to produce or services to provide? • They study the market: • what’s selling • how much it’s selling for, and • how much of it is selling

  5. What’s demand? • Law of Demand • States that the quantity demanded of a good or service varies inversely (opposite) with its price. (In other words, when the prices goes up, quantity demanded goes down. When price goes down, quantity demanded goes up.) “Law” means it’s proven over & over in study after study. Prices act as obstacles/incentives – Is it true in your life?

  6. What’s demand? The desire, abilityand willingness to buy a product. For it to create a demand, all 3 factors have to be true.

  7. Individual Demand Schedule

  8. Market (Aggregate) Demand Schedule

  9. Why does demand curve slope downward? • Remember utility? • Remember marginal? • Marginal utility is the extra usefulness or satisfaction a person gets from acquiring or using 1 more unit of a product. • Principle of diminishing marginal utility: • Extra satisfaction we get from using additional quantities of the product begins to diminish. • We don’t get as much joy, pleasure, or usefulness for the 2nd, 3rd, 4th, etc., of the same product, so we won’t pay as much for the 2nd, 3rd, 4th, etc., of the product as we did the first one we bought.

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