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CHAPTER 5

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

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  1. CHAPTER 5 ECONOMICS DEMAND AND SUPPLY

  2. INTERACTION PRICE AND DEMAND • Demand is set by consumers • How are decisions made? • CD Example

  3. 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

  4. 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

  5. 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

  6. 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

  7. LAW OF DEMAND-Price Increase • Inverse relationship between price and quantity demanded • Price decreases, quantity demanded increases • Why?

  8. 3 Reasons for Law of Demand • Law of diminishing marginal utility • The Income effect • Substitution effect

  9. 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

  10. 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

  11. Demand Shifters • Changes in Income • Changes in number of consumers • Changes in consumer tastes and preferences • Changes in consumer expectations

  12. Demand Shifters • Changes in price of substitute good • Changes in price of complimentary goods

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