Discuss What is a market? In a market who is the consumer? How does the price of a good affect the consumer?
Market An arrangement that allows buyers and sellers to exchange things Markets exist because no one is self sufficient and no one produces all we require to satisfy all our needs and wants.
Demand Description The quantities of a particular good or service consumers are willing and able to buy at different possible prices at a particular time
Demand Illustration p.1 sec. 1 As price goes up, quantity goes down Price D1 Quantity
Discuss How does demand and “want” or “desire” differ? You may want or desire a new car or a closet full of clothes, but you demand these things only when you are willing and able to buy them.
Quantity Demand The quantities of a particular good or service consumers are willing and able to buy at set prices at a particular time
Quantity Demand Illustration Price D2 Quantity
Demand Schedule How much people are going to buy at the various prices. Ex. The price of pizza Price Quantity $.50 $1.00 $1.50 $2.00 $2.50
Law of Demand As price goes up quantity goes down As price goes down quantity goes up People buy less of something at higher prices than they do at lower prices.
ELASTIC DEMAND: demand that is very sensitive to a change in price goods that one might stop buying or cut back on as price increased (SUVs, Luxury items)**on a graph this demand curve will be FLAT
INELASTIC DEMAND demand that is not very sensitive to a change in price goods that you would buy at any price; there are few if any substitutes for these goods. (milk, gas, prescription drugs) **on a graph this demand curve would be very steep.
Illustration of Decrease and Increase in Demand Decrease in Price Increase in Price Price Price D2 D1 D2 D1 Quantity Quantity The less you buy the more you will move to the left!
The Demand Curve The Demand Curve slopes downward to the right because the consumer is willing and able to buy more gasoline at lower prices than at higher prices.
Scenario #1 Harris Teeter is advertising a sale on hot dog buns. What is the impact on the demand for hot dogs?
Scenario #2 Playstation 3, the newest video game console, hits stores. What is the impact on the demand for Xbox 360?
Scenario #3 The weatherman forecasts rain for the weekend in Charlotte. What is the impact on the demand for umbrellas?
Scenario #4 The N.C. General Assembly increases minimum wage to $7/hour. What is the impact on the demand for clothing?
Scenario #5 A snowy blizzard blows through Charlotte. What is the impact on the demand for snow boots?
Scenario #6 The price of MP3 players decreases dramatically due to new technology. What is the impact on the demand for portable CD players?
Scenario #7 Summertime is approaching. What is the impact on the demand for shorts?
Scenario #8 The price of hamburgers increases at Food Lion. What is the impact on the demand for French fries?
Changes in Demand
Reasons Demand can change People’s Income Weather Complementary Goods Substitute Goods
What is a Complementary Good? Complementary Good: Two goods that are usually consumed together (Hot Dogs & buns)
What is a Substitute Good? Substitute Good: An acceptable replacement for a good (Playstation & Xbox)
People’s Income Increases P Effect on Demand Demand Increases (shift right) D1 D2 Q
Bad Weather (for product) Effect on Demand Demand Decreases (shift left) P D1 D2 Q
Price of Complementary Good Decreases (ex: peanut butter & jelly) P Effect on Demand Demand Increases (shift right) D1 D2 Q Peanut Butter
Price of Substitute Good Decreases (ex: Pepsi & Coca-Cola) P Effect on Demand Demand Decreases (shift left) D1 D2 Q Pepsi
Complementary vs. Substitute Can YOU tell the difference????
Elasticity of Demand How much the quantity demanded will change if the price rises or falls.