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Lea unit 5 project
- 1. Demand • Schedule or curve • Amount consumers are willing and able to purchase at a given price • Other things equal • Individual demand • Market demand LO1 3-1
- 2. The Demand Curve P6 Individual Demand 5 P Qd Price (per latte) 4 $5 10 3 4 20 2 3 35 2 55 1 D 1 80 0 10 20 30 40 50 60 70 80 Q Quantity Demanded (latte per month) LO1 3-2
- 3. Changes in Demand P 6 Price (per latte) 5 4 Increase in demand 3 2 D2 1 D1 Decrease in D3 demand 0 2 4 6 8 10 12 14 16 18 Q Quantity Demanded (thousands of lattes per month) LO1 3-3
- 4. Changes in Demand • Number of Buyers in Market • Change in consumer tastes, preferences or need • Change in prices of related goods • Substitutes • Complements • Change in income • Normal goods • Inferior goods LO1 3-4
- 5. Changes in Quantity Demanded • Change in demand is a shift of the demand curve • Change in quantity demanded is a movement from one point to another point on a fixed demand curve 3-5
- 6. Changes in Quantity Demanded • Change in demand is a shift of the demand curve • Change in quantity demanded is a movement from one point to another point on a fixed demand curve 3-5
Editor's Notes
- First we must draw a demand curve, showing the relationship between price of a product and the quantity demanded. This is accomplished by establishing a list of possible price and the quantity buyers would purchase at each price.
- Notice that as price goes down, the quantity demanded will increase. If the price changes from $5 to 4, the demand does NOT change—that is, the curve does not change, we just move from one point on the curve to another point. Economists say that ‘when price changes quantity demanded changes’.
- However, there are other (non-price) determinants of demand that are not pictured on the graph that will cause the entire curve to shift upward to the right (if there is an increase in demand).
- If the number of buyers in the market increases, then demand will increase or shift upward. Any change in taste, preference or need can change the quantities of a given product that buyers are willing and able to purchase at each price. Advertising is designed to increase demand for a specific product. A substitute good is when one good is similar to another, such as Coke and Pepsi If goods are complementary, consumers purchase them together—such as peanut butter and jelly. A change in the income of buyers can also influence demand. For all normal goods, when income goes up, demand for the product will increase There is an exception to this rule—for inferiior goods—but that is for a later lesson!
- It is important to distinguish between a change in demand and a change in the quantity demanded. A change in demand represents a shift of the demand curve to the right (an increase in demand) or to the left (a decrease in demand). It occurs because the consumer’s desire to purchase the product has changed. A change in the quantity demanded is a movement along a fixed demand curve caused by an increase or decrease in the price of a product.