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
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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.