1 / 24

Demand - PowerPoint PPT Presentation

  • Updated On :

Demand. Chapter 3. What is demand?. The willingness and ability to purchase a good or service Demand = Willingness and ability to purchase. The Law of Demand. As a price of a good increases the quantity demanded of the good decreases and vice versa

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Demand' - toviel

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Demand l.jpg


Chapter 3

What is demand l.jpg
What is demand?

  • The willingness and ability to purchase a good or service

  • Demand = Willingness and ability to purchase

The law of demand l.jpg
The Law of Demand

  • As a price of a good increases the quantity demanded of the good decreases and vice versa

    • Quantity Demanded – is there a difference between demand and quantity demanded?

      • A demand for popcorn

      • Buying the popcorn 2 bags for 1 dollar is quantity demanded

Opposite directions l.jpg
Opposite Directions

  • Why do price and quantity demanded move in opposite directions?

    • Law of diminishing marginal utility

      • Candy experiment

    • As you obtain less utility from additional units you will only buy large quantities at low prices

Demand schedule l.jpg
Demand Schedule

  • Law of Demand says…

    • The up / down relationship is inverse relationship

    • A chart showing the inverse is a demand schedule

Demand curve l.jpg
Demand Curve

  • 3-1 b shows the demand curve

    • Plotting connected points to show patterns

    • There are almost always patterns in economics

What happens when said curve shifts l.jpg
What happens when said curve shifts?

  • Demand curves shifting right or left show more or less demand of a product at price

  • What causes these shifts?

Income l.jpg

  • As income goes up, people have the ability to purchase more of a good

    • This doesn’t necessarily mean they will

  • Normal Good – income goes up, purchase of that good goes up

  • Inferior Good – income goes up, purchase of that good goes down

  • Neutral Good – income goes up, purchase of that good stays the same

Preferences l.jpg

  • People prefer certain products

    • Types of video games

Prices of related goods l.jpg
Prices of Related Goods

  • Substitute Goods

    • Cars – Coffee / Tea – Video Games

  • Complements

    • Things that go together

      • Balls / Bats

      • PS2 / Games

      • Cars / Tires

Number of buyers l.jpg
Number of Buyers

  • Certain goods are demanded more in certain areas

    • Surfboards / CA v. SD

Change in demand v change in quantity demanded l.jpg
Change in Demand v. Change in Quantity Demanded

  • A change in demand refers to a shift in the curve

  • Change in quantity demanded = A movement from one point to another point on the same demand curve

Responsibilities of buyers l.jpg
Responsibilities of Buyers

  • Researching

  • Ethics in paying

Section 3 l.jpg
Section 3

  • Elasticity of Demand

    • Relationship between percentage change in in quantity demanded and the percentage change in price

      % Change in quantity demanded

      Elasticity of demand = ----------------------------------------------------

      % Change in price

Demand15 l.jpg

  • Elastic demand – when quantity demanded percentage changes more than the price

  • Inelastic demand – when quantity demanded percentage changes less than the price

  • Unit Elastic demand – when quantity demanded and price have similar relationships

Determinants of elasticity l.jpg
Determinants of Elasticity

  • The number of substitutes has great effects on elasticity

    • Heart Medicines

    • Breads

Luxuries v necessities l.jpg
Luxuries v. Necessities

  • Luxury – don’t need it to survive

  • Necessity – Food, medicine…

    • Which goods are elastic?

Percentages of income l.jpg
Percentages of Income

  • Making budgets on any level, percent of income is studied

  • Obvious which goods are more responsive to

  • Relationship to Time

    • Changing to adapt and adjust over time

What does it matter l.jpg
What does it matter?

  • All versions of elasticity matter, because they relate to total revenue

Case 1 l.jpg
Case 1

  • A rise in price does not necessarily mean a rise in revenue

    Elastic demand + Price rise = TR Decrease

Case 2 l.jpg
Case 2

  • If demand is elastic and price is decreased, revenue will go up

    • Elastic Demand + Price Decline = TR Increase

Case 3 l.jpg
Case 3

  • Inelastic demand + Price Rise = TR Increase

  • If demand is inelastic a price rise will lead to a revenue increase

Case 4 l.jpg
Case 4

  • If demand is inelastic and price declines, total revenue will decrease

  • Inelastic demand + Price decline = TR Decrease

Unit elastic l.jpg
Unit Elastic

  • Equal forces in opposite directions

  • No change to total revenue