Economics
Chapter 4: Demand
Today’s Agenda
• Begin Chapter 4 Demand
• Homework
– Complete Questions 1-7 by Friday
By the end of this lesson, I “demand”
that you be able to:
• Define Demand
• Define elasticity and
inelasticity
• Explain what factors affect
demand
• Define diminishing marginal
utility
What is Demand?
• Amount of a good or service
that consumers are willing and
able to buy
• Influenced by
– Price
• Consumers willingness to sacrifice
– Income
• Consumer must be able to afford it
– Substitution
• Alternate good or service available
– Taste
• Consumer must like the good or
service
What does the Law of Demand say?
• When price goes
UP, demand goes
DOWN
• When price goes
DOWN, demand
goes UP
• Demand Curve
– Economic model
illustrating law of
demand
What is the elasticity and inelasticity of
demand?
• Elastic Demand
– State in which a price
increase has a major
impact on demand
– Rise in price of Doritos will
greatly affect demand
• Inelastic Demand
– State in which price
increase has little impact
on demand
– Rise in price of gasoline
will not greatly affect
demand
Factors that Decide if Demand is Elastic or Inelastic
• Luxury or necessity
– Luxury – want that is nice but not necessary
• smartphone*, Camaro, tanning salon, shore
house
• Highly elastic demand
– Necessity- needed to live
• Food, water, shelter, healthcare
• inelastic demand
• Substitutions
– Can the good or service be replaced with something
else
– Instead of Doritos, Fritos
– Something easily substituted is highly elastic
• Consumer Income
– How much money consumer makes affects demand
Is this Hollister shirt elastic or inelastic?
Explain why.
Today’s Agenda
• Finish Chapter 4 Slide Show
• Complete Crossword Puzzle Review
• Quiz on Chapter 3-4 next week (Wed or
Thursday)
Review
• What is the term for the amount of a good or
service that consumers are willing and able
to buy?
• What is the term for demand in which a
change is price greatly affects demand?
• What is the term for demand in which a
change in price does not affect demand?
What factors cause demand to change?
• Income
– More income allows more demand
• Substitution
–
–
–
–
if there is an alternate
Coke: Pepsi
Comcast: Verizon
Bottled Water: Tap Water
• Weather
– Winter Storm: Snow shovels, salt
– Summer time: Sunglasses, shorts
• Population
– More people means more demand
– Finding a hotel room during 4th of July down the
shore
• Taste
– What consumers like changes
– Cigarettes, cassette players
• Utility
– More useful/satisfying a product the greater its
demand
What is Diminishing Marginal Utility?
• Utility
– Usefulness and satisfaction
consumer gets from product
– More utility greater the
demand
• The more you like something,
the more you are willing to pay!
• Diminishing Marginal Utility
– Point at which satisfaction
decreases with each
additional
– Eventually each additional
products is less satisfying