Demand Demand • The amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time period. The graph can be any shape/curve, as long as it is pointing down! $ # of Goods/Services Quantity Demanded • The amount of a good or service that a consumer is willing and able to buy at each particular price during a given time period. At $100 dollars per iPod, the quantity demanded is 22. Price Of iPods $100 22 # of iPods Law of Demand • An increase in a good’s price causes a decrease in the quantity demanded. • A decrease in a good’s price causes an increase in the quantity demanded. • EXAMPLE: – You want to buy an iPod. If it is cheap, do you have a high demand or low demand for it? If the price goes up, does your demand increase or decrease? P =D , P =D Demand for Twix $2.00 Think about how you react to price changes… D -2 $1.50 D -1 $1.00 $.50 5 10 15 20 Quantity Demanded At $1.00 per candy bar, about 16 Twix are If the price of Twix increases to $1.50 per demanded by students in this class. candy bar, the quantity demanded will DECREASE to ????? Diminishing Marginal Utility • As more units of a product are consumed, the satisfaction received from consuming each additional units declines.