Demand lect ap_web

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Demand lect ap_web

  1. 1. The Law of DemandAn increase in price will cause a decrease inthe quantity demanded (inverse relationship)EXPLAINERS:Income effectSubstitution effect
  2. 2. The Law of DemandEXPLAINERS:Income effectSubstitution effectDiminishing Marginal Utility
  3. 3. The Law of DemandP P AP1 BP2 D1 D2 Q1 Q2 Q Q CHANGE IN CHANGE IN OTHER= PRICE= change in demandchange in quantity
  4. 4. The Law of Demand P D1 D2 Q CHANGE IN OTHER= change in demand
  5. 5. Determinants of DemandThings other than price that cause the wholecurve to shift Increase: shift to the right Decrease: shift to the left
  6. 6. Determinants of DemandChange in consumer tastesChange in people’s income normal goods inferior goods
  7. 7. Determinants of DemandChange in prices of related goods complementary goods (inverse effect) substitute goods (direct effect)Change in expectationsChange in size of market
  8. 8. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (a) people change their preference from hamburgers to hot dogs?
  9. 9. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (b) U.S. negotiates a deal w/ China to trade hot dogs for egg rolls?
  10. 10. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (c) the price of ground beef plummets?
  11. 11. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (d) the minimum wage rises?
  12. 12. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (e) the MWU threatens a strike if owners fail to meet their demands?
  13. 13. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (f) unemployment hits an all-time high?
  14. 14. What Happens to Demand if…?SITUATION: You’re the owner of a hot dog makingcompany: (g) the price of buns increases due to a wheat shortage?

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