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Demand Demand

Demand - PowerPoint Presentation

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Demand - PPT Presentation

BUY LOW Demand In Economics demand is the willingness to buy something and the ability to pay for it To be able to demand something you have to be able to buy it Buying power ID: 180331

price demand good buy demand price buy good change income curve consumers effect goods quantity schedule law elasticity increases

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Slide1

Demand

BUY LOW! Slide2

Demand

In Economics,

demand

is the

willingness

to buy something and the

ability

to pay for it.

To be able to demand something, you have to be able to buy it.

Buying power =

ability to buy Slide3

Law of Demand

The Law of Demand states that consumers buy more of a good when the price decreases.

Consumers buy less of a good when it increases. Slide4

Law of Demand is a the result of…

The Substitution Effect

Consumers react to price increases by consuming less of the good and more of other goods. Slide5

Substitution Effect

Price of Snickers Goes Up

Buy Something Else, like a Butterfinger, or a delicious ZERO bar. Slide6

Law of Demand is a the result of…

The Substitution Effect

Consumers react to price increases by consuming less of the good and more of other goods.

Example: Snickers price goes up, eat Kit-Kats,

Milkyways

, Butterfingers, etc.

The Income Effect

Change of

consumption based

on a change in income. Slide7

The Income Effect

If you get a raise, you can buy a Mercedes Benz.

If

your income decreases,

buy a fuel efficient Kia. Slide8

Law of Demand is a the result of…

The Substitution Effect

Consumers react to price increases by consuming less of the good and more of other goods.

Example: Snickers price goes up, eat Kit-Kats,

Milkyways

, Butterfingers, etc.

The Income Effect

Change of consumption based on a change in income.

Example: Get a raise, buy a Benz.

Decrease in income,

get an old Kia. Slide9

Demand vs. Quantity Demanded

Demand is…the ability & willingness to purchase a good.

Quantity Demanded

is the amount of a good or service demanded at a certain price. Slide10

Demand Schedules

Individual Demand Schedule

Price of a slice of pizza

Quantity demanded per day

Market Demand Schedule

Price of a slice of pizza

Quantity demanded per day

$.50

$1.00

$1.50

$2.00

$2.50

$3.00

5

4

3

2

1

0

$.50

$1.00

$1.50

$2.00

$2.50

$3.00

300

250

200

150

100

50

The Demand Schedule

A

demand schedule

is a table that lists the quantity of a good a person will buy at each different price

.

A

market demand schedule

is a table that lists the quantity of a good all consumers in a market will buy at each different price.Slide11

Market Demand Curve

3.00

2.50

2.00

1.50

1.00

.50

0

0

50

100

150

200

250

300

350

Slices of pizza per day

Price per slice (in dollars)

Demand

The Demand Curve

A

demand curve

is a graphical representation of a demand schedule.

When reading a

demand curve

, assume all outside factors, such as income, are held constant

. Slide12

Elasticity of Demand

Elasticity is a measure of change in price.

If the price increases or decreases, how will that

a

ffect the demand of that good? Slide13

Elasticity of Demand

When consumers will continue to buy a product despite a price increase, the good is considered

inelastic. (not elastic)

When we won’t buy a good due to price increase, the good is considered

elastic. Slide14

Factors Affecting Elasticity

Availability of Substitute.

Cigarettes – no substitute

Candy bars – tons of substitutes

Relative importance.

Necessities vs. Luxuries

Change over time.

People will eventually find a substitute good. Slide15

Last Slide :D

Elasticity of demand impacts revenue of firms.

If the good is very elastic, How will raising the price impact the business’s total revenue?

If they raise the price too much, they lose money. Slide16

The Determinants of Demand

What causes the demand curve to shift? Slide17

Shift in the Demand Curve

Change in

Income.

Income goes up, we can buy more units of the good if the price remains the same.

Change in

Consumer Expectations.

If something is cheaper today than it will be next week, buy it now!

Change in

Population.

More old people, need for old people homes. Bolivians move into an area, Bolivian stores open. Etc. Slide18

Shifts in Demand Curve

Change in

Advertising.

Advertising creates consumers tastes.

Kanye

wears these.

People buy them. Slide19

Shifts in the Demand Curve

Changes in the

Price of Related goods.

Complement goods:

skis and ski boots

.

Substitute Goods:

skis and snowboards.