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 Grade Upgrade 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… Copyright ACDC Leadership 2015 10 Change in Quantity Demanded • Income Effect • If price goes down, purchasing power goes up and vice versa • Substitution Effect • Pepsi vs. Coke Nature of Demand Curve • Diminishing marginal utility • What would compel you to buy additional JBCs? Can you see the Law of Diminishing Marginal Utility in Disneyland’s pricing strategy? Copyright ACDC Leadership 2015 2010 Question 36 14 Copyright ACDC Leadership 2015 Homework •Read pgs. 54-59 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 •Homework: Read pgs. 59-62 and complete Supply worksheet