 Demand : In economic terms, demand is the amount of a good or service that a consumer is willing and able to buy at all the various possible prices during a given time period.
 When represented graphically, DEMAND is the whole curve itself

 Quantity Demanded: the amount of a good or service that a consumer is willing and able to buy at each particular price
point during a given time period.
 When represented graphically, QUANTITY
DEMANDED is the individual points on the curve

The Demand Curve ALWAYS slopes this way

 Law of Demand: states that an increase in a good’s price causes a decrease in the quantity demanded; and that a decrease in price causes an increase in the quantity demanded.
 In a free-enterprise system, price is the main variable affecting Quantity demanded.

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Purchasing Power: the amount of money, or income, that people have available to spend on goods and services.
Usually, as one’s purchasing power increases, their Demand will increase for a particular good/service as well.

 Determinants of Demand: Factors, OTHER
THAN PRICE , that create more or less demand for a product or service.
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These will shift the entire demand curve to the Left (less demand) or the Right (more demand).
***A price change will only change the
Quantity Demanded***

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Consumer Tastes
 Ex. Bands, endorsements, “Going Green”
Number of Consumers (market size)
 Embargos, New Technology can create new markets while hurting others. (Cell phones -
Landline)

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Income
 More $ = More likelihood of spending (Beef vs.
Steak Problem)
Consumer Expectations
 (Expecting a Raise, predicting future prices)
Prices of Related goods
 Substitute & Complimentary

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Substitute Goods – A consumers tendency to switch to a lower priced, but similar product.
(Butter vs. Margarine)
Complementary goods – Goods that are commonly used with other goods (Peanut
Butter & Jelly)
 ***Only 1 market will experience a Demand curve shift…..the other experiences a price change or
Quantity Demanded

 In groups of 2-3, imagine that you are the officers of a school club…..To raise money for your club, you are selling tickets to a dance. Your task is to think of ways to increase ticket sales without lowering the ticket prices…..
 Come up with as many ideas as you can think of for ALL FIVE DETERMINATES OF
DEMAND to shift the Demand Curve for dance tickets to the Right - - - - - - - - - - - - - >

 Elastic Demand - When a small change in price GREATLY Changes the Quantity
Demanded
 The Demand Curve looks almost horizontal
 These goods are Not Necessities
 These goods have many substitutes

 Inelastic Demand - When a change in price causes LITTLE or NO change in Quantity
Demanded
 The Demand Curve looks almost Vertical
 These goods are more need based
 These goods have few/no substitutes
 These goods are very cheap (Salt or Soap)

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PEoD =
(%Change in Quantity Demanded)/(%Change in Price)
To Calculate %Change in Quantity Demanded:
 [Qdemand(new) - Qdemand(old)] / Qdemand(old)
To Calculate %Change in Price:
 [Price(new) - Price(old)] / Price (old)
 Price Elasticity deals in Absolute Values

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Consider the following figures.
Price
$9
Quantity Demanded
150
$10 110
What is the Price Elasticity of this Product?

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PEoD =
(%Change in Quantity Demanded)/(%Change in Price)
To Calculate %Change in Quantity Demanded:
 [Qdemand(new) - Qdemand(old)] / Qdemand(old)
To Calculate %Change in Price:
 [Price(new) - Price(old)] / Price (old)
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Step 1: [110 - 150 = -40] / 150 = .26667
Step 2: [10 - 9 = 1] / 9 = .1111
Step 3: (-.26667) / (.1111) = -2.4005
Answer: 2.4005 is the Elasticity of this good.

 * If PEoD > 1 then Demand is Price Elastic
(Demand is sensitive to price changes)
 * If PEoD < 1 then Demand is Price Inelastic
(Demand is not sensitive to price changes)