Name:____________________________________
Economics Unit 2 Demand Study Guide
Period:________
Mr. Tengowski
Demand is the various ____________________ of a product a person is willing to buy at different prices at a
particular time.
________________________ is the lower the price of a good, the greater the quantity demanded of that
good.
________________________ is the aggregate (sum) of many individual decisions to buy.
Monthly Demand for Donuts
Brice
Matt
Cody
Benner
$1
6
11
8
6
$2
5
10
6
6
$3
4
10
4
4
$4
3
7
2
4
$5
2
4
0
2
$6
1
1
0
0
1. Show the market demand by filling in the blanks of the table…
2. Suppose the price of Donuts rises to from $2 to $4.
a. What happens to the total numbers of donuts the four consumers want to buy?
_________________________________________________________
b. Is this a change in demand? Explain__________________________________
Price per Donut
3. Use the table to plot the market demand for
donuts on the following graph:
Total
1.
2.
3.
4.
If the price of CD’s is $15, how many will people buy?___________________
If the price of CD’s is $25, how many will people buy?___________________
If the quantity of CD’s sold is 250, what is the price?____________________
If the quantity of CD’s sold is 50, what is the price?____________________
The quantity of CD’s demanded depends upon the ______________________ of the CD’s.
When the price of the CD’s changes, the ____________________ _______________________ changes.
Why is the demand curve downward sloping?
1. The Wealth Effect – as prices decline, people’s money has more ______________ ________________,
thus you feel richer and will buy more goods and services at the lower prices.
Examples:
2. Substitutes – Most goods have substitutes, but our willingness to use them depends on ___________. If
the price of good A increases, people will turn to substitutes and buy less of good A.
Examples:
3. Diminishing Marginal Utility – is the point at which the next item consumed is less satisfying than
before – i.e. you get less ___________ out of the 3rd slice of pizza you eat, than you do for the first two.
Thus, lower prices are needed to increase the quantity demanded by an individual consumer.
Examples:
Diminishing Marginal Utility
Marginal Utility of Baseball Caps and Ice Cream Sundaes
# of Caps
Total Utility
Marginal Utility
# of Sundaes
0
0
0
1
80
1
2
120
2
3
150
3
4
170
4
5
180
5
6
185
6
Total Utility
0
20
36
50
63
75
86
Number of Baseball Caps
Number of Sundaes
Number of Baseball Caps
Number of Sundaes
Marginal Utility
Consumer Surplus
The amount that ____________________ benefit by being able to purchase a product for a price that is less
than they would be willing to pay.
Number of Notebooks
1
2
3
4
5
6
7
Total Utility
Marginal Utility
$20
$38
$54
$67
$76
$83
$87
1. What is the marginal utility associated with the purchase of the 4th notebook? _________________
2. What is Alex’s consumer surplus if he purchases 4 notebooks at $10 a piece? __________________
3. What would happen to Alex’s consumer surplus if he purchased an additional notebook at $10?
____________________
4. How many notebooks should Alex buy when they cost $10 a piece? ___________________
5. If notebooks go on sale and their price drops to $7, how many notebooks do you expect Alex to buy?
___________
Elasticity of Demand
Elasticity of Demand- measures the _______________________ of quantity demanded to a change in price.
Elastic - Very Responsive – The quantity demanded changes greatly with changes in price…
Examples:
Inelastic – Unresponsive – The quantity demanded changes very little with changes in price…
Examples:
Some of the factors that determine whether demand is elastic or inelastic:

Elastic
_____________________________
Inelastic
• _____________________________

_____________________________
•
_____________________________

_____________________________
•
_____________________________

_____________________________
•
_____________________________
Why does this matter? With inelastic demand there is always an ___________________ to raise prices.
The 5 Qualities that affect the Elasticity of Demand
A.________________________________________
B.________________________________________
C.________________________________________
D.________________________________________
E._________________________________________
Which of the following goods has a more elastic demand?
Wendy’s Burger____
Diapers____
Heat in Pittsburgh in February_____
Levi’s Jeans _____
Milk _____
v.
v.
v.
v.
v.
This graph is _____________________________.
Gasoline____
Tickets to the Penguins Home Opener____
Half Gallon of Orange Juice _____
Baby Food _____
Starbucks Coffee _____
This graph is ___________________________.
The steeper the graph, the more ________________________ the demand curve is. The flatter the curve, the
more _____________________ the demand curve is.
Total Revenue Test for Elasticity – P x Q = TR
 If P and TR move in the same direction → inelastic good
 If P and TR move in opposite directions → elastic good
Reminder!! Check Page 25 in your packet to review Elasticity when it comes to policy problems!!
Price rises from $10 to $12. Quantity Demanded decreases from 70 to 60.
a. Old Price X
Quantity Demanded =
Old Total Revenue
_______
________________
_______________
b. New Price X
Quantity Demanded =
New Total Revenue
_______
________________
_______________
c. Price ↑ ↓
TR ↑ ↓
The Demand is __________________.
Price falls from $6 to $5. Quantity Demanded increases from 300 to 400.
a. Old Price X
Quantity Demanded =
Old Total Revenue
_______
________________
_______________
b. New Price X
Quantity Demanded =
New Total Revenue
_______
________________
_______________
c. Price ↑ ↓
TR ↑ ↓
The Demand is __________________.
Price falls from $7.50 to $7.00. Quantity Demanded increases from 100 to 200.
a. Old Price X
Quantity Demanded =
Old Total Revenue
_______
________________
_______________
b. New Price X
Quantity Demanded =
New Total Revenue
_______
________________
_______________
c. Price ↑ ↓
TR ↑ ↓
The Demand is __________________.
Factors that Shift Demand Curves
Real Life Example
Factor
Change in Expectations
Change in the Number of Consumers
Change in Consumers Income
Change in the Price of Substitute Goods
Change in the Price of Complimentary Goods
Change in Consumers’ Tastes and Preferences
-Make sure to identify the direction of the demand shift and one of the factors that could shift a demand curve.
Event
The price of chicken
increases
Gym Memberships grow
in popularity
Planes Crash in the
Atlantic Ocean
The price of chocolate
rises
People’s Incomes
increase
A New Energy source is
created
Pirates sign the #1 overall
pick
Product
Steak
Nike workout shoes
Tickets to Disney World
Peanut Butter
Ipods
Air Conditioners
Pirate Tickets
Demand Shift
Rationale
1. Title your graph DEMAND FOR CHICKEN IN OCTOBER, and label each axis correctly.
2. Draw a demand curve and label it Curve D. This is the current demand for Chicken in October.
3. Read the following 6 Newspaper Headlines. In each case decide if the event will cause a change in the
demand for chicken. If so, determine if it is an increase or a decrease and write the correct answer.
4. Draw a new curve representing the new demand for chicken caused by the headline and label it with the
next consecutive letter in the alphabet. For example if you begin at curve D and there is a decrease in the
demand for chicken, then draw a new curve to the left of curve D and label it curve C. If you begin at
curve D and you believe that the event causes an increase in demand then draw a new curve to the right
of curve D and label it curve E.
5. Begin at the last curve you drew and move only one curve at a time. Once you have drawn a curve you
can use it again.
 Chicken prices rise; Consumers buy less
Demand_____________________
Curve_____


Beef prices rise dramatically
Demand_____________________
Curve_____
Everyone believes that eating chicken cures acne
Demand_____________________
Curve_____

FDA warns that eating chicken can lower your chances of living past 70
Demand_____________________
Curve_____

Millions of Immigrants Increase the US Population
Demand_____________________
Curve_____
Price of Chicken expected to fall in November
Demand_____________________
Curve_____
