Notes chapter 4 demand


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Notes chapter 4 demand

  1. 1. Chapter 4 - Demand Section 1 – Understanding Demand Section 2 – Shifts in Demand Section 3 – Elasticity of Demand
  2. 2. Group Work/Presentations • Directions: – Read the section that refers to your question(s). – Prepare a presentation to teach your term(s) to the class. Be sure to answer all questions from your chapter or section. – Add something from that section/chapter that you think may be important/interesting for your classmates to know. – Create a visual aid as part of your presentation for your chapter (skit, drawing, illustration, etc.)
  3. 3. Jumpstart Assignment • Study for your Economics Overview Quiz.
  4. 4. Jumpstart Assignment • Turn to page 78 of your textbook, answer the question under “Economics Journal.”
  5. 5. What is Demand? • Demand – the desire and ability to buy something • The law of demand states that consumers buy more of a good when its price decreases and less when its price increases. • This is because of the substitution effect and the income effect.
  6. 6. Demand Schedule • A demand schedule is a table that lists the quantity of a good a person will buy at each different price. • A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at each different price.
  7. 7. Demand Curve • The demand curve is always downward sloping. • Change in Quantity Demanded – a movement along the demand curve, a result of the change in the price of a good • Change in Demand – a shift in the demand curve
  8. 8. What Causes Shifts in Demand? 1. Income Changes in consumers incomes affect demand. A normal good is a good that consumers demand more of when their incomes increase. An inferior good is a good that consumers demand less of when their income increases. 2. Consumer Expectations Whether or not we expect a good to increase or decrease in price in the future greatly affects our demand for that good today.
  9. 9. What Causes Shifts in Demand? 3. Population Changes in the size of the population also affects the demand for most products. 4. Consumer Tastes and Advertising Advertising plays an important role in many trends and therefore influences demand.
  10. 10. 5. Change in Demand for Other Goods Complements are two goods that are bought and used together. Example: skis and ski boots Substitutes are goods used in place of one another. Example: skis and snowboards What Causes Shifts in Demand?
  11. 11. Jumpstart Assignment • Describe the difference between a change in demand and a change in quantity demanded, then show what it looks like graphically.
  12. 12. Elasticity of Demand • Elasticity of demand is a measure of how consumers react to a change in price. • Demand for a good that consumers will continue to buy despite a price increase is inelastic.
  13. 13. Elasticity of Demand • Demand for a good that is very sensitive to changes in price is elastic.
  14. 14. Total Revenue Test • Elastic Demand – TR will increase with a drop in price. • Inelastic Demand – TR will decrease with a drop in price.
  15. 15. Factors Affecting Elasticity of Demand • Availability of Substitutes • Relative Importance (portion of budget) • Necessities vs. Luxury • Time