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Microeconomics - PowerPoint PPT Presentation


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Microeconomics. Unit 3. Market. Arrangement that allows buyers and sellers to exchange things Production side Supply Factors of production Consumption side Demand Determinants of demand. Demand. Amount of a good desired at a given price in a specific time. Graphing.

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Presentation Transcript
market
Market
  • Arrangement that allows buyers and sellers to exchange things
    • Production side
      • Supply
      • Factors of production
    • Consumption side
      • Demand
      • Determinants of demand
demand
Demand
  • Amount of a good desired at a given price in a specific time
graphing
Graphing
  • The price is always located on the vertical axis and quantity is always located on the horizontal axis.
  • Numbers increase as they move away from the origin.

$

0

0

Q

graphing demand
Graphing Demand
  • Demand Schedule
    • Ice Cream Sundae Price
        • 1 5.00
        • 2 4.50
        • 3 4.00
        • 4 3.50
        • 5 3.00
        • 6 2.50
        • 7 2.00
graphing demand1
Graphing Demand
  • Demand Curve

$

6.00

5.50

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

D

1 2 3 4 5 6 7 8

Q

law of demand
Law of Demand
  • Demand increases as price decreases
  • Demand decreases as price increases
  • Inverse Relationship
quantity demanded
Quantity Demanded
  • Quantity demanded is caused by a change in price
    • All other factors remain the same
elasticity
Elasticity
  • How sensitive a product is to a change in price
    • Elastic – very responsive
    • Inelastic – not responsive
calculating elasticity
Calculating Elasticity
  • Run over Rise

% Quantity

% Price

        • PRACTICE (< > = 1)
      • Price of Gasoline up from $3.50 to $3.60 while quantity demanded down from 6000 gallons to 5900 gallons.
      • Price of candy down from $3.00 to $2.50 while quantity demanded up from 30 bags to 40 bags.
      • Quantity of Senior Sweats down from 305 to 300 sets while price up from $30 to $35.
income effect
Income Effect
  • The change in consumption resulting from a change in real income
  • Normal Good
    • Reacts normally or follows the law of demand
  • Inferior Good
    • Demand decreases as income increases
      • “Great Cracker Taste Test”
changes in demand
Changes in Demand
  • Changes in the Determinants of Demand cause changes in Demand at every Price
    • Determinants of Demand
      • Income
      • Attitude
      • Substitute
      • Complement
            • http://nbr.com/2013/04/05/bright-ideas-getting-to-the-point/
effects of determinants
Effects of Determinants
  • Increase Demand
    • Get a raise
    • Popular advertisement
    • No substitute choices
    • New products to go with the original
effects of demand
Effects of Demand
  • Decrease Demand
    • Lose your job
    • Fad not popular anymore
    • New competitor in the market
    • Complement not available anymore
critical thinking
Critical Thinking
  • Income
  • Attitude
  • Substitute
  • Complement
  • Price

D = curve shifts left or right

Qd = movement is on the curve

exit slip
Exit Slip
  • Use the blank half sheet of paper to make up a scenario in which demand will change over time.
    • Name the product
    • Describe the change in the market
    • State which determinant changed
    • Graph the changes on demand
      • Don’t forget to put you name on the paper
      • Due at the end of the period