# 2-1 - Demand

```DEMAND
• Definition: The various quantities of a good or service that
someone is WILLING and ABLE to buy at DIFFERENT PRICES at
a PARTICULAR TIME
• WILLING and ABLE
•Does Mr. Bull have
demand for…?:
YES!
NO!!!
NO!
Individual Demand vs.
Market Demand
• I may not have demand for a porsche, but
others do…
• Market Demand – Sum of all individual’s
demand
Demand Schedule
Certificates
Graphing Demand
Demand Schedule
Demand Curve
Law of Demand
• As Price increases, Quantity
Demanded decreases
• As Price decreases, Quantity
Demanded increases
As P↑, Qd↓
As P↓, Qd↑
Why does the Law of Demand occur?
The law of demand is the result of three
separate behavior patterns that overlap:
1.The Income effect
2.The Substitution effect
3.The Law of Diminishing Marginal
Utility
We will define and explain each…
10
Change in Quantity Demanded
• Income Effect
• If price goes down,
goes up and vice
versa
• Substitution Effect
• Pepsi vs. Coke
Nature of Demand Curve
• Diminishing marginal utility
• What would compel you to buy
Can you see the Law of Diminishing Marginal
Utility in Disneyland’s pricing strategy?
2010 Question 36
14
Homework
and complete
Demand
worksheet
Change in Quantity Demanded
Individual Demand
P
6
P
\$5
Qd
10
4
20
3
35
2
55
1
80
Price (per bushel)
5
4
3
2
D2
1
D1
D3
0
2
4
6
8
10
12
14
16
18 Q
Quantity Demanded (bushels per week)
3-17
Individual Demand
P
Change in Demand
6
P
\$5
Qd
10
4
20
3
35
2
55
1
80
Price (per bushel)
5
Change in Quantity
Demanded
4
3
2
D2
1
D1
D3
0
2
4
6
8
10
12
14
16
18 Q
Quantity Demanded (bushels per week)
3-18
Change in Demand
1. Change in Income
mo’ money = mo’ problems purchases
normal vs. inferior
2. Change in Prices and Availability of Substitutes
ex: Pens and Pencils
3. Change in Prices and Availability of Complements
ex: Paper and Pencils
4. Change in Weather or Seasons
ex: Shorts in winter, Sleds in summer, Gas?
5. Change in Number of Buyers
ex: larger/smaller market, population change, technology
6. Change in Styles, Tastes, Habits, Preferences
fashion, coolness, trends – ex:
7. Change in Expectations
future oriented – ex: harvest, technology
Practice
•Work through the
worksheet