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Ch7 sect2 Ch7 sect2 Presentation Transcript

  • Chapter 7, Demand Curve and Elasticity of Demand Section 2
  • Learning Goal
  • Demand Schedule Table showing quantities demanded at different possible prices Price per CD Q demanded (millions) $20 100 $15 600 $12 900 $10 1,100
  • Demand Curve  Downward sloping line that shows the quantities demanded at each possible price $20 $15price $12 $10 100 600 900 1100 Quantity of Cds demanded
  • Determinants of Demand Changes in population Changes in income Changes in Tastes and Preferences Substitutes Complementary Goods  A product often used with another product  See Figure 7.5, page 182
  • Corn Prices Rise to due Increased Demand for Ethanol http://www.biodieselinvesting.com/biodies el-archives/2007/01/10/rise-in-corn-prices- due-to-demand-from-ethanol-production/
  • Market Activity1. Think of a product or service you or your family would purchase regardless of price – list the maximum price you would be willing to pay for this2. Think of a product or service you would only purchase if you perceived it to be relatively inexpensive. – list the maximum price you would be willing to pay for this
  • Elasticity Elasticity: Economic concept dealing with consumers’ responsiveness to an increase or decrease in price of product Price elasticity of demand: economic concept that deals with how much demand varies according to changes in price
  • Elastic Demand Situation in which the rise or fall in a product’s price greatly affects the amount that people are willing to buy
  • Inelastic Demand Situation in which a product’s price change has little impact on the quantity demanded by consumers Examples of products that are elastic and inelastic? Does this relate to utility?
  • Ch 7, S2 Quiz1. Explain why an increase in demand for ethanol increases the prices of corn2. What is one product for which you have an elastic demand? Why is it elastic vs. inelastic?3. What does the demand curve look like?