1. Advances in Supply Chain Management Part 2 Chapter 7 : Demand Planning 2.
Demand Part 2
description
Transcript of Demand Part 2
DEMAND(part 2)
DEMANDRecall: There is an indirect (negative) relationship between price (P) and quantity demanded (Qd).
P= QD P= QD
• An increase in the price of eggs leads to a decrease in the quantity demanded of eggs. !• A decrease in the brice of bread leads to an increase in the quantity demanded of eggs.
DEMANDThe amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good.
P= QD P= QD
DEMAND
P
QDP
QDChange in Price
(Change in quantity demanded)
Recall: The demand curve compares price (P) to quantity demanded (Qd) at that price.
Recall: Quantity demanded (Qd) is different from demand (the demand curve itself). Change in Other Factors
(Change in demand)
Qd1Qd2
D1D2
DEMANDP
QDP
QDChange in Price
(Change in quantity demanded)
Quantity Demanded (QD): It’s a specific value and point on the graph!
Change in Other Factors (Change in demand)
Demand (D): It’s what we call the whole curve!
DEMANDMovement along the demand curve:
results from a change in price
PQD
Change in price
Example: Max will buy 3 waffles
when they each cost $2. When the waffles cost 3$,
he will only buy two waffles.
DEMANDMake a list of factors that can cause the
demand curve to SHIFT.
PQD
P
QDIncrease in demand Decrease in demand
DEMANDShifts: Certain factors cause a higher or lower
quantity to be demanded at every price.
P
QDIncrease in demand
D1D2
• Change in income !• Change in preferences !• Change in future
expectations !• Change in the price of a
substitute or compliment good
PRACTICE PROBLEM #1
6 !5 !4 !3 !2
1
2 4 6 8 10 12
P (o
f coo
kies
)
QD (of cookies)
1. Copy this graph. 2. The current price of
cookies is 2$. Indicate the original price (P1) and the original quantity demanded (Qd1) on the graph.
3. The price of cookies changes to 5$. Indicate the new price (P2) and the new quantity demanded (Qd2).
PRACTICE PROBLEM #1
6 !5 !4 !3 !2
1
2 4 6 8 10 12
QD (of cookies)
1. Draw arrows from P1 to P2, and from Qd1 to Qd2 to illustrate the changes taking place.
2. Fill in the blanks with arrows:
!
____P , ____Qd !
P (o
f coo
kies
)
PRACTICE PROBLEM #2P
(of R
ice
Flak
es)
QD (of Rice Flakes)
The price of Rice Crisps cereal just decreased. What happens to the demand for Rice Flakes cereal? !
Draw a new demand curve labeled “D2” to represent this situation.
PRACTICE PROBLEM #3P
(of M
ilk)
QD (of Milk)
The price of Rice Crisps cereal just decreased. What happens to the demand for milk? !
Draw a new demand curve labeled “D2” to represent this situation.
PRACTICE PROBLEM #4P
QD
Max just started a new job with a higher salary than his old one. How will this affect his overall demand for goods and services? !
Draw a new demand curve labeled “D2” to represent this situation.
Complete “Demand Worksheet #2” NOW