Demand
9-12
Video Link
 http://www.econedlink.org/lessons/index.php?lid=961&ty
pe=educator
Journal (9-12 Video)
 What did the clip show us about supply and demand?
BIG Ideas
 Describe how the principle of voluntary exchange operates in
a market economy.
 Explain how diminishing marginal utility, the real income
effect and the substitution effect relate to the law of
demand.
Voluntary Exchange
 Voluntary exchange –
 It is the basis of activity in a market economy
 Exchange of goods in which the buyer and seller both accept the
benefit and opportunity cost
 This introduces supply and demand as a model of how buyers
and sellers interact
Demand
 Demand – all of the different quantities of a good
or service that consumers will purchase at various
prices
 Law of Demand – explains how people react to
changing prices in terms of the quantities of a good
or service
 How do you believe changing prices affect demand
under this law?
The Law of Demand
Price goes up…
demand goes
down.
Price goes
down…demand
goes up
Factors that affect demand (3)
 Utility – how satisfied a person is with a purchase
 1) Law of diminishing marginal utility – the more you
buy of a given product (shoes) the less satisfaction you get
from it
 When the value of satisfaction exceeds the price of the product
demand will go away
Factors Continued
 2) Real Income Effect
 Individuals cannot continue to buy a product if the price of
that product goes up and their income stays the same
 Price goes goes up… demand goes down
Factors Continued
 3)Substitution Effect
 If two items satisfy the same need people will select the
cheaper item
 XBOX vs. PS3
Journal (9-12 Relating)
 Give an example of a personal experience you have had while
purchasing a good or service that relates to each of the 3
factors of the law of demand that we just covered.
 1) law of diminishing marginal utility
 2) real income effect
 3) substitution effect