What is one thing you would desire and why ? Can you affor d it? Can you freely get it?
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Transcript of What is one thing you would desire and why ? Can you affor d it? Can you freely get it?
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•What is one thing you would desire and why?
•Can you afford it? •Can you freely get it?
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DEMAND the desire, ability and willingness of consumers to buy a good or service
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DesireDo you want it?
If not, then you do not have
DEMAND for a product.
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AbilityCan you afford it? Do you
have the ability to pay for it?
If not, then you do not have
DEMAND for a product. 11
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WillingnessAre you ready to buy it
voluntarily, without being forced?
If not, then you do not have DEMAND for a product.
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DEMAND the desire, ability and willingness of consumers to buy a good or service
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DEMAND SCHEDULE
A price / quantity schedule showing amounts of a good or
service consumers are willing and able to purchase at a set of prices
during a specific time period.
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DEMAND SCHEDULE
Price Quantity Demanded (Qd)
5 10
4 20
3 30
2 40
1 5015
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DEMAND CURVE
A graph illustrating the amounts
of a good or service consumers are willing and able to purchase at a set of prices during a specific time period.
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Demand Curve
Qd
P
D1
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LAW OF DEMAND
Price and consumer demand have an inverse (opposite) relationship. If price goes up, consumer demand goes down. If price goes down, consumer demand goes up.
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Change in Quantity Demanded * Caused by an immediate change in
the price of the item you want to buy
* A change in quantity demanded is illustrated by movement ALONG a demand curve, from point to point as the price of the consumer good changes.
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Change in Quantity Demanded
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Example:
Chicken wings are regularly 15 cents a piece, and you usually eat 20 wings. Today wings sell for 10 cents a piece, so you buy 30 wings. At 9pm, wings will sell for 5 cents each, and you will buy 40 wings. The change in price causes an increase in your quantity demanded.
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Change in Quantity Demanded is caused by one of the following: • The Income Effect: the changed price makes you feel like you
have more money in your pocket to spend, causing you to purchase more of the item. (p87)
• EXAMPLE: The donuts you wanted to buy are on special. You can buy 2 for the price of one (BOGO). The savings make you feel like you have MORE MONEY, so you BUY MORE!
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Change in Quantity Demanded is caused by one of the following: • Substitution Effect: relative to other goods/services, the price
of the G/S you buy is less, causing you to purchase more of it. (p87)
• EXAMPLE: a new CD costs you $15, but I-Tunes offers single songs for 99 cents. Rather than buy a CD, you purchase 10 songs on i-tunes.
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CHANGE IN DEMAND
• A change in Demand is illustrated by a new demand curve.
• At every price, more of a good or service is purchased.
• Or, at every price, less of a good or service is purchased.
• Change in Demand is caused by one of the determinants of demand 23
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Demand Curve
Qd
P
DD2 D1
D1: Increase in Demand from original D to D1D2: Decrease in Demand from original D to D2
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Change in Demand
• Caused by change in CONSUMER INCOME (p88)
• Your spending habits change with your income
• EX: You were making $8/hr; now you are making $16/hr; in 3 years, you’ll make $50/hour
• How is celebrity spending different from your spending habits?
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Change in Demand
• Caused by Consumer TASTES AND PREFERENCES – trends (p88)
• As an item becomes more popular, demand increases; demand decreases as the good loses favor
• EXAMPLES: • Walkman v. I-POD• Pet Rock v. Webkinz• VCR v. DVD Player
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Change in Demand
• Caused by the Price of RELATED PRODUCTS (substitutes and compliments) (p88-89)
• Substitutes – You can buy DVDs rather than videos
• Compliments – Maple trees get a fungus and die; no maple syrup; the demand for pancake and waffle mix decreases
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Change in Demand• Caused by PRICE EXPECTATION – the anticipated FUTURE
price of the product (NOT in text book)• You decide to buy or not buy based on what you think will
happen in the market at a future time• EXAMPLE : You expect the price of the Wii to decrease after
Christmas. How does that affect demand today?
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Change in Demand
• Caused by the NUMBER OF CONSUMERS or buyers in the market (NOT in text book)
• EXAMPLE: What is the demand for popcorn in a movie theater? Outside?
• EXAMPLE: What is the demand for a college degree today? 50 years ago? 29
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Change in Demand
• Is caused by the SEASONS, which affect our choices for goods and services (NOT in the text book)
• EXAMPLE: What is your demand for ice cream in July? In January?
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DETERMINANTS OF CHANGE IN DEMAND
•Taste and Preference•Income•Number of Consumers•Price of Related Goods•Price Expectations•Seasonal
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CHANGE IN QUANTITY DEMANDED
OCCURS ONLY WHEN THERE IS AN IMMEDIATE CHANGE IN THE PRICE OF THE G/S YOU ARE BUYING 32
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Change in QD vs. Change in D
1. Beef prices fall; consumers buy more. 2. Millions of illegal immigrants swell U.S. population.3. Scientists expect chicken virus to affect 30% of U.S. farms.4. Buy one, get one free sale on sweaters at the GAP5. America swears off bread and pasta due to Atkins Diet6. You lose your job. 7. Compact disks replaced by i-Tunes
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Diminishing Marginal Utility
•How useful is something? •First piece of pizza? 5th piece of pizza?
•Working with 1 other person….2…..5???
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