Here are some examples of goods with different demand elasticities: - Insulin (inelastic): People need it to live, so they will still buy it even if the price increases significantly. - Sodas (elastic): People can more easily substitute with other drinks or water if the price increases, so even a small price change would significantly impact the quantity bought. Let me know if you need any clarification or have additional questions!

1. Demand
Academic Decathlon—Lesson 6
Berryhill Economics

2. There are substitutes for
EVERYTHING!
 The law of demand is dependent on the notion
that for anything there is a substitute which will
be used when the opportunity cost of a thing is
high enough.
 Definitions:
--Substitute: things are used in place of
something else
--Complement: things that are used together
--Independent Goods: neither substitutes or
complements

3. Demand
 Individual Demand Schedule—a table that
lists the number of items demanded by
one person at various prices
 Market Demand Schedule—a table that
lists the number of items demanded by an
entire market or group of people

4. Demand

5. Demand
 Individual Demand Curve—the graphic
representation of the individual demand
schedule
 Market Demand Curve—the graphic
representation of the market demand
schedule

6. Demand
 The demand curve is almost always
downward sloping
 The vertical axis is always labeled PRICE
 The horizontal axis is always labeled
QUANTITY

7. Demand
 Law of Demand—quantity demanded of a
good and its price vary INVERSELY,
ceteris paribus
--ceteris paribus means that if all other
factors are held constant, then as the price
of the good rises, the quantity demanded
of the good will fall

8. Demand
 Utility—a product’s use or how much
satisfaction or use a person gets out of a
product
 Can anyone think of why utility will affect
demand? Why are we returning to utility?

9. Demand
 Marginal Utility—how much MORE a
person will get out of adding ONE MORE
unit of a product
 How much utility will you get from a glass
of lemonade on a hot day?
 How much MORE utility will you get from a
second glass?
 A 10th glass? A 50th glass? A 100th
glass?

10. Demand
 Diminishing Marginal Utility—the
satisfaction (or utility) obtained from
consuming a good declines as more units
of the good are consumed
 This is why demand curves slope
downward.

11. Change in Quantity Demanded
 Abbreviated ΔQd
 Change in Qd is represented as a
movement along the demand curve and
results from a change in price

12. Change in Qd

13. Change in Qd
 The only thing that will result in a Change
in Qd is a change in price of the product
we are talking about
 This is just a movement ALONG the curve
that is already given—going from one
point to another

14. Change in Demand
 Abbreviated ΔD
 Change in D—portrayed as a shift of the
ENTIRE demand curve and it is caused
when something changes the quantity of a
product demanded at each price

15. Change in D
 This is when you get an entirely NEW
curve, so each point has changed. Now
people are demanding more or less of the
product at each price.
 Can you think of anything that would do
this? What would cause you to buy more
or less CDs, even though the price of the
CD stays the same?

16. Change in Demand
 Determinants of Demand—things that will cause
a change in D
--A change in the price of substitutes
--A change in the price of complements
--A change in consumer income
--A change in population
--A change in consumer tastes
--A change in consumer expectations

17. Increases in Demand
 The entire demand curve shifts RIGHT.
(Demand curves only shift RIGHT or
LEFT, never UP or DOWN!) This is
because at each given price there is now
more quantity demanded. To show there
is an increase in quantity, we move RIGHT
because our quantity axis increases as we
move further to the right.

18. Decreases in Demand
 The entire demand curve shifts LEFT.
This is because at each given price there
is now less quantity demanded. To show
there is a decrease in the quantity, we
move left because our quantity axis
decreases as we move further to the left.

19. Changes in D

20. Demand Elasticity
 Demand elasticity is the extent to which a
change in price causes a change in
quantity demanded
 How much does price influence how much
we buy of a product

21. Demand Elasticity
 Elastic Demand—when a given change in
price causes a relatively larger change in
Qd
 Inelastic Demand—when a given change
in price causes a relatively smaller change
in Qd
 Unit Elastic—when a given change in price
causes a proportional change in Qd

22. Determinants of Demand
Elasticity
 Can the purchase be delayed?
--If yes, demand tends to be elastic
--If no, demand tends to be inelastic
 Are adequate substitutes available?
--If yes, demand is usually elastic
--If no, demand is usually inelastic

23. Determinants of Demand
Elasticity
 Does the purchase use a large portion of
income?
--If yes, demand tends to be elastic
--If no, demand tends to be inelastic

24. Graphical Representations

25. Graphical Representations

26. Examples
 What is something that you would still buy,
even if there was a drastic increase in
price?
 What is something you would stop buying
or limit your purchase of if there was just a
small change in price?