consumers and demand. the law of demand demand: the desire to own something and the ability to pay...
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The Demand Schedule PriceQuantity DemandedTRANSCRIPT
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Consumers and Demand
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The Law of Demand
Demand: The desire to own something and the ability to pay for it.
The Law of Demand: Consumers buy more of a good or service when its price decreases and less when its price increases.
It’s all about getting the most for your buck (e.g. the auction market)
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The Demand SchedulePrice Quantity Demanded
10 09 18 17 36 45 44 53 52 51 5
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The Demand Curve
Demand Curve
$0$5
$10$15
1 2 3 4 5 6 7 8 9 10
Quanitity Demanded
Pric
e
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Shifts in Demand What causes a shift?
Income Normal Goods (Income
increases → Demand increases)
Inferior Goods (Income increases → Demand decreases)
Consumer Expectations (e.g. sales)
Population (e.g. baby boomers)
Consumer Tastes and Advertising
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Consumer Tastes and Advertising
Food Fashion Entertainment Personal Health Toys Clothing
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Shifts in Demand (Cont’d)
As consumers earn more money, they are able to spend more.
Income effect: The change in consumption resulting from a change in income.
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Shifts in Demand (Cont’d) Goods used in place of
one another (substitute products – e.g. sugar and Splenda).
Two goods that are brought and used together (complementary products – e.g. hot dogs and buns).
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Elasticity of Demand
The degree to which changes in price cause changes in quantity demanded (Elastic vs. Inelastic).
Two Reasons for Elasticity of Demand:The relationship between income and cost of
the product (Car vs. Salt)Whether or not a substitute is available
(Butter vs. Margarine)