Demand!
Warm-up! 9/30 • Describe and explain a time in your life when you have experienced the effects of price on demand. Did you end up buying the product? What went into your decision?
Activity! • On a blank sheet of paper make the following chart titled “Class Demand Schedule” • Name the product being sold above the graph
Price $10 $9 $8 $7 $6 $5 $4 $3 $2 $1
Number of students willing and able to buy at this price
Demand Curve 10 9 8 7 6 5 4 3 2 1 0 # of Students Able and Willing to Buy the Product
Demand Curve • We’ve created a demand curve! • Why might some students be willing to pay $10 for this product? • Why might some students choose not to pay even $1? • What happens to the quantity demanded for this product when the price goes down? When the price goes up? • Most demand curves look similar to this one. Given this, what do you think the “law of demand” might say?
Demand! • Law of Demand – As the price of a good or service goes up, demand goes down, as the price goes down, demand goes up.
• What is one example you could give to show this law works?
Demand! • Demand Schedule – a list of the quantities of a good that one person will buy at various prices – Varies by person – Follows the Law of Demand
• Demand Curve – a graph showing the relationship between the price of a good or service and the quantity of buyers willing and able to buy
Demand! • What would happen to the demand curve if 15 more students were added to the class?
Demand! • Demand – the quantity of a good or service that consumers are both willing and able to buy at various prices • Quantity Demanded – the amount of a good or service that consumers are willing and able to buy at a specific price – Can increase or decrease – Represented by a specific point on the demand curve (we’ll get to this in a second) – What could cause a change in quantity demanded?
Shift of the curve (D) vs. Movement along the curve (QD)
Shift of the curve vs. Movement along the curve • What would cause a shift in demand? – – – – – –
Income change Number of consumers Tastes and preferences Expectations Price of substitute goods Price of complementary goods
• What would cause a movement along the demand curve? – Price
• https://www.youtube.com/watch?v=yuwtEln2 xgk
Elasticity of Demand!! • What is elastic? • What does it do? • What is something that is elastic? • Super stretchy! • Think: – Rubberbands – Sweatpants – Bungee Cords
Elasticity of Demand!! • When the price of a good or service changes, does the demand of that good or service change as well? – If the demand changes drastically along with the price then the good or service has elastic demand – If demand does not change drastically with price then the good or service has inelastic demand
Elasticity of Demand!! • Elasticity of Demand – a measure of the sensitivity of consumers to a change in price • Elastic Demand – the demand of a good or service is highly responsive to a change in price • Inelastic Demand – the demand of a good or service is not responsive, or only slightly responsive, to a change in price
Let’s do some PRACTICE! • https://www.youtube.com/watch?v=d29VsG3 5DQM • In groups of four, come up with 5 goods/services that are elastic and 5 that are inelastic. Be prepared to share your lists with the class and explain why each is elastic/inelastic
Let’s do some PRACTICE! • Finish the practice sheet “Practice, Elasticity of Demand”
Warm-up 10/2!!! • What is the difference between demand and quantity demanded? • What types of goods have elastic demand? Why?
Changes in Demand • Determinants of Demand – the factors that can change demand • These are factors that cause the curve to shift… or things that mean we have to draw a new line…. Ughh.
Determinants of Demand!!! • Consumer Tastes/Preferences – When fads change demand for goods change, too – Preferences might change seasonally – What goods or services is there currently demand for that you could see changing with time?
Determinants of Demand!!! • Income – Generally speaking, a rise in income will lead increased demand and a fall will cause demand to decrease – Mo’ money, mo’ problems… not really. People like to have money, in part, so they can buy more goods/services. • Some goods/services demand actually varies inversely with income • “Inferior goods” • Why would this happen?
Determinants of Demand!!! • Number of Consumers – All things constant - more people to buy goods, more goods will be demanded – fewer people, fewer goods will be demanded – This is why businesses really, really, REALLY want to sell goods to China
Determinants of Demand!!! • Price of Substitute Goods – What is a substitute good again? • Exactly
– If the price of a replacement good decreases drastically, the demand of the original good will decrease and if the price increases, demand of the original will increase – Examples?!?
Determinants of Demand!!! • Price of Complementary Goods – What is a complementary good? • PRECISELY!
– Prices of complementary goods and the demand of the original good are inversely related
Determinants of Demand!!! • Expectations of the FUTURE – Expectations of future price • If a consumer predicts higher future prices, the demand of a good will increase • If a consumer predicts lower future prices, the demand of a good will decrease
– Expectations of future income • If a consumer predicts an increase in future income, their current demand will increase • If a consumer predicts a decrease in future income, their current demand will decrease
Determinants of Demand!!! • Try these! –Will it cause an increase of demand, decrease of demand, or stay the same • The price of eggs falls. – Demand of omelet making goods will _______ – Demand of eggs will ___________
• 200 new students enroll at West High – Demand of coffee at the coffee shop will_______
Determinants of Demand!!! • Recently the demand for snapbacks has ___________ because _______________ • “Did you know that the price of gold is about to SKYROCKET?!?!?!!!” This will cause current demand for gold to ___________ because of _________________ • “The price of tea is at an all-time low!” This will cause the current demand for coffee to _____________ because of _____________ • “The price of coffee is at an all-time low!!” This will cause the demand of coffee to ___________ because of ___________.
Schedule 10/3 • • • • • • •
Twitter! Warm-up! Review homework! Advertising! Review! Demand quiz Monday! Textbooks Tomorrow!!!
Warm-up! 10/3 • What are the six determinants of demand? Give an example of each.
Advertising Elasticity of Demand (AED) • Does money spent on advertising effect demand? • If yes, the advertising elasticity of demand is said to be high. • Let’s look at some types of advertising
Advertising!! • Targeting specific market segments • Use of music or graphics to target specific groups of people (i.e. women, men, children, whites, African Americans) • https://www.youtube.com/watch?v=YDCY56aze w8 • https://www.youtube.com/watch?v=0Emz--1Jz3k
Advertising!! • Temporary Sales Increase • This would be time-sensitive offers • https://www.youtube.com/watch?v=8dmqekj 7smk
Advertising! • Increase Specific Product • Used to sell more of an individual product
Advertising • AED! • AED can be interesting • Impacts specific brands – Often times little impact on entire industry – So what’s the point?
Review!! • Demand review: • Vocab – Demand – Demand Schedule – Quantity Demanded – Demand Curve – Substitute Good – Income Effect
Review!! • How do you make a demand schedule? • How do you convert a demand schedule to a demand curve? • What is the difference between demand and quantity demanded when graphing demand?
Review!! • • • •
Elasticity of Demand!! What is elasticity of demand? What types of goods have elastic demand? What types of goods have inelastic demand?
Determinants of Demand • Demand shifters? • Difference between change in QD and D? • Analyzing effect on demand from headlines