ECONOMICS Demand Staker DEMAND n DEMAND desire ability

ECONOMICS Demand Staker

DEMAND n DEMAND: desire, ability and willingness to buy a product. n Measured by sales.

DEMAND CURVE n DEMAND CURVE: shows how much consumers will demand at each and every price. Demand curves always go DOWNWARD n Supply curves always go UPWARD n

LAW OF DEMAND n LAW OF DEMAND: n as prices go up demand goes down n As prices go down demand goes up

Law of Demand n The law of demand says that when a good’s price is lower, consumers (you) will buy more of it. (On the other hand, when prices are higher consumers will buy less of it. )

Demand Schedules n A market demand schedule shows the quantities demanded at each price by all consumers in the market. n An individual demand schedule shows the quantities demanded at each price by one consumer in the market

Demand Curve n A demand curve is a graphic representation of a demand schedule. The curve or line usually slopes downward and to the right.

CHANGE IN DEMAND n CHANGE IN DEMAND: when people are willing to buy more or less of a product at the SAME PRICES. Curve shift to LEFT: decreased demand n Curve shift to RIGHT: increased demand n

WHY DOES DEMAND CHANGE? 1. 2. 3. 4. 5. Consumer Income: As income goes up/down, consumers buy more/less of a product. Consumer Tastes: Advertising, trends, and even seasons can affect demand. Prices of Related Products: change in the price of related products can change demand. 1. Ex. Butter vs. Margarine Population Consumer Expectations

SUBSTITUTION EFFECT n SUBSTITUTION EFFECT: Change in quantity demanded for one product because of a change in the price of another product. n Ex. Butter prices go up, so people will start buying more margarine (a substitute for butter)

COMPLEMENTARY GOODS n COMPLEMENTS: related goods where use of one increases the use of the other. (CDs and CD players). EX - Lower price of CD players means higher demand for CD players and also higher demand for CDs. n EX - Higher CD player prices cause less demand for CDs. n