Economics Unit II: Microeconomics. Chapter 4: Demand. Economics Chapter 4: Demand. Why is it important to understand Demand? A knowledge of demand is essential in understanding how a market economy works. Knowledge of demand is also important for sound business planning.
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Chapter 4: Demand
Why is it important to understand Demand?
**Lifestyle changes can create new market demand.
1st left page Question #1:
Record the names and approximate prices of the last two items you purchased. In general, would you have spent your money differently if the price of each item was twice as high? Would you have spent your money differently if each of the items cost half as much as it did? Explain your response in complete sentences.
1st left hand page Question #2:
Why is price a consumer’s obstacle to buying? Explain your answer
1st left hand page question #3:
Factors Affecting Demand
1. The change in the quantity demanded shows a change in the amount of a product purchased when there is a change in price.
2nd left hand page question #1: Imagine you have a weekly budget for groceries. When you shop one week, certain items you needed were on sale, and after you paid the cashier, you had $20 left. What would you do with the extra money? Explain
2. A change in demand is when people buy different amounts of the product at the same prices.
2nd left page Question #2:
Although CDs are by far today’s most popular form of musical recording, interest in vinyl albums is growing. What might happen to the demand for vinyl albums as interest increases? Explain.
2nd left hand page Question #3:
What are some examples of items for which an increase in price would cause you or your family to reconsider buying them? Give at least 3 examples and explain why you would reconsider buying them.
The Total Expenditures Test
Price x quantity demanded = total expenditures
3rd left page Question #1:
What are some examples of items for which a drop in price wouldnot encourage you to buy more of an item? Give at least 3 examples and explain your reasons you would not buy more of it.
Determinants of Demand Elasticity
1. Can the purchase be delayed? (some purchases cannot be delayed, regardless of price changes).
2.Are adequate substitutions available? (Price changes can cause consumers to substitute one product for a similar product).
3. Does the purchase use a large portion of income? (demand elasticity can increase when a product commands a large portion of a consumer’s income).
** Glue chart here **
3rd left hand page Question #2:
What are some things you buy for which price is not the issue? At least 3 examples. Explain why price is not an issue for each.
4th left hand page Question 1: