Unit #1 Benchmark TEST
25 questions
Take out a pencil and clear your desk.
30 minutes
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Warm Up #10
When I buy something, I usually expect…
List characteristics of the goods or services
that are supposed to be provided.
5 minutes
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Class Confession
We the Senior Class of 2016 will complete ALL of
our assignments to best of our abilities and
behave appropriately in class.
We will respect all faculty, staff, substitutes,
classmates, and especially Mr. Wilcox.
We will graduate on time May 20, 2016 and
become productive citizens in society.
NEXT
Scaffold understanding of the standard(s) and/or element(s). Paraphrase
the standard(s) and/or element(s). Rewrite the standard including
synonyms or brief definitions in parentheses and in a different color
following the key terms found in step 1.
SSEMI2
You will be able to explain how the Law of
Demand (want), the Law of Supply (amount),
prices (values), and profits (earnings) work to
determine production and distribution (delivery)
in a market (shop) economy.
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The Law of Demand
What is Demand?
You will be able to explain how the Law of
Demand, the Law of Supply, prices, and
profits work to determine production and
distribution in a market economy.
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Chapter 4: Demand
KEY CONCEPT
Demand is the willingness to buy a good or service and the ability to
pay for it.
WHY THE CONCEPT MATTERS
*The concept of demand is demonstrated
every time you buy something. Think of five
goods or services that you have purchased.
Which of them would you stop buying if the
price rose sharply?
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2 important conditions of Demand
1. People
are willing to purchase it
2. People are able to purchase it
$200
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So what
influences YOU
to purchase an
item or not?
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The Price
As the price
increases
consumers buy
less.
As the price
decreases
consumers buy
more.
P ↑, QD↓
P ↓, QD↑
P= Price
QD= Quantity Demanded
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This is the Law of Demand
There is an inverse
relationship
between a product’s
price and the
quantity demanded.
*Law of demand explains
consumer behavior as
well as economic
concept.
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How do producers
come up with
these prices
anyway?
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Demand Schedules
KEY CONCEPTS
• Demand schedule- a table that summarizes one
consumer’s behavior
*Lists how much of an item an individual
will buy at each price
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Quantity Demanded to Price
A Demand Schedule
Price of
Widgets
Number of
Widgets
People Want to
Buy
$1.00
100
$2.00
90
$3.00
70
$4.00
40
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Demand Curves
KEY CONCEPTS
•
Demand curve- a graph that shows amount of
an item a consumer will buy at each price
–Demand curves graphically show information
found on demand schedules
–Vertical axis shows prices
–Horizontal axis shows quantities demanded
–Demand curves slope down from upper left to
lower right
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What demand schedules and
demand curves illustrate?
Demand schedules
show in table format
• the quantity of
goods and services
consumers are
willing and able to
purchase at each
price in the market.
Demand curves
show in graph
format
• the data listed in
demand schedules
• How much of goods
and services
consumers will buy
at a price
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Closure Activity #8:
Vera Wang: Designer in Demand p. 104
Responding to Demand
•
•
•
•
Sophisticated wedding gowns not available for career women
Wang created line of wedding gowns to meet demand
Style became popular; other designers imitated
Wang created more demand for her style by designing other products
• Answer Analyzing Cause and Effect D. on the
lines below. 5 minutes
_________________________________________________________
__________________________________________________________
_______________________________________________________
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Show What You Know!
Georgia Milestone Practice Question
In economics, the amount of a product a consumer is
willing and able to buy at various possible prices during a
given time is called
Supply
Demand
Substitution
Utility
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Show What You Know!
Georgia Milestone Practice Question
If the price for an item continues to increase what will
happen to the quantity demanded
It will fall
It will fluctuate
It will increase
It will remain the same
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Show What You Know!
Georgia Milestone Practice Question
The quantity of goods that consumers are willing and able
to buy at a series of prices can be listed on a demand
Graph
Schedule
Curve
Line
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Show What You Know!
Georgia Milestone Practice Question
When people use their resources so that marginal
benefits exceed marginal costs, they
Make rational economic decisions
Make irrational economic decisions
Eliminate the opportunity costs of decisions
Fail to use resources efficiently
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Show What You Know!
Georgia Milestone Practice Question
When people make more money they usually
Save more
Spend more
Sell more things
Have more interest
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THE END
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
23NEXT
Warm Up #11
Draw demand curves from the demand
schedules in each group from the white
board.
5 minutes
NEXT
Class Confession
We the Senior Class of 2016 will complete ALL of
our assignments to best of our abilities and
behave appropriately in class.
We will respect all faculty, staff, substitutes,
classmates, and especially Mr. Wilcox.
We will graduate on time May 20, 2016 and
become productive citizens in society.
NEXT
SSEMI3
You will be able to explain how the markets, prices, and competition influence
economic behavior.
a. Identify and illustrate on a graph factors that cause changes in market
demand.
Determine and define vocabulary. Identify key terms within the
standard. Define each term.
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________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
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Scaffold understanding of the standard(s) and/or element(s). Paraphrase
the standard(s) and/or element(s). Rewrite the standard including
synonyms or brief definitions in parentheses and in a different color
following the key terms found in step 1.
You will be able to explain (describe) how
the markets, prices, and competition
(rivalry) influence (effect) economic
behavior.
a. Identify (recognize) and illustrate
(demonstrate) on a graph factors (issues)
that cause changes in market demand.
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Determinants of Demand
You will be able to explain how the markets,
prices, and competition influence economic
behavior.
a. Identify and illustrate on a graph factors that
cause changes in market demand.
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What Factors Affect Demand?
KEY CONCEPTS
•
•
•
Law of diminishing marginal utility
– marginal benefit of each additional unit declines as each unit is
used
Income effect
– amount people buy changes as purchasing power of their
income changes
Substitution effect
– amount people buy changes as they buy substitute products
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Change in Quantity Demanded
KEY CONCEPTS
•
Change in quantity demanded
– change in amount consumers buy because of change in price
– each change shown by new point on demand curve
–Does not shift the demand curve
itself
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Change in Quantity Demanded
EXAMPLE: Changes Along a Demand Curve
• Individual demand curve
– change in quantity demanded shown by movement to
right or left along the curve
• Market demand curve
– shows similar information for entire market
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Change in Demand
KEY CONCEPTS
•
Change in demand is caused by a change in the marketplace
– prompts people to buy different amounts at every price
– also called shift in demand
Six factors can cause change in
demand
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Non-Price Determinants of product
demand shifts:
C-onsumer tastes and preferences
R-elated Goods Price/Complementary goods
I- ncome
M-arket Size
E-xpectations (consumer)
S-ubstitues
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Change in Demand
FACTOR 1 Consumer Tastes and Preferences
• Consumer tastes change; products gain and lose
popularity
• Consumers demand a greater amount of popular items at
every price
• Sellers advertise to create demand for products
– i.e. Air Force Ones
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Change in Demand
FACTOR 2 Related Goods/Complements
• Complements—goods that are used together
• Rise in demand for one increases the demand for the
other
• If price of one product changes, demand for both
changes in same way
– if price of one rises, demand for both will drop
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Change in Demand
FACTOR 3 Income
• A person’s ability to buy goods changes as his or her
income changes
• As incomes of most consumers in a market change, so
does total demand
– Normal goods- demanded more when consumers’
incomes rise
– Inferior goods- demanded less when consumers’
incomes rise
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Change in Demand
FACTOR 4 Market Size
• As number of consumers in an area changes, so does
market size
– i.e. Moody Air Force Base
• Demand for most goods changes as market size
changes
– rise in population leads to increased demand
– decrease in population leads to decreased demand
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Change in Demand
FACTOR 5 Consumer Expectations
• Expectations about future price of items affect individual
behavior
– expected rise or fall in price can decide whether to buy
now or wait
• Expectations of all consumers in a market affect demand
– example: because cars go on sale at end of summer,
demand goes up then
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Change in Demand
FACTOR 6 Substitutes
• Substitutes—products used in place of each other
– if price of substitute drops, people buy it instead of original item
– if price of original item rises, people will buy substitute
$2
$1.50
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Show What You Know!
Georgia Milestone Practice Question
When economics refer to “demand” they mean which of
the following?
How much satisfaction buyers receive from a purchase
How much consumers will purchase at different prices
How much sellers will supply at different prices
How much people want the product if its free
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Show What You Know!
Georgia Milestone Practice Question
Which of the following is an attempt by a firm to increase
the demand for its product?
the imposition of a price ceiling on the product
an advertising strategy designed to change consumer
tastes and preferences
a marketing strategy to make the good scarce and
therefore more expensive
a production strategy to flood the market with the good or
service
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Show What You Know!
Georgia Milestone Practice Question
The principle that producers will only produce goods that
will yield them a profit because it is something
consumers want is known as the:
Law of diminishing marginal utility
Law of demand
Equity price
Price elasticity
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Closure Activity #9
Worksheet 5A
Worksheet 5B
Worksheet 5C
Determinants of Demand
Worksheet
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THE END
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
44NEXT
Warm Up #12
Get a Math Skills: Demand Calculating
Elasticity of Demand off of the podium.
5 minutes
NEXT
Class Confession
We the Senior Class of 2016 will complete ALL of
our assignments to best of our abilities and
behave appropriately in class.
We will respect all faculty, staff, substitutes,
classmates, and especially Mr. Wilcox.
We will graduate on time May 20, 2016 and
become productive citizens in society.
NEXT
SSEMI3c
c. Define price elasticity of demand and supply.
Determine and define vocabulary. Identify key terms within the
standard. Define each term.
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
NEXT
Scaffold understanding of the standard(s) and/or element(s). Paraphrase
the standard(s) and/or element(s). Rewrite the standard including
synonyms or brief definitions in parentheses and in a different color
following the key terms found in step 1.
Define price elasticity (resistance) of demand
(want) and supply (quantity).
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Elasticity of Demand
SSEMI3c
c. Define price elasticity of demand and
supply.
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Elasticity of Demand
KEY CONCEPT
• Buying habits affected
by type of product and
importance to
consumer
• Elasticity of demand
– The degree or
measure of how
responsive
consumers are to
price changes
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Elastic Demand
1. Elastic—quantity
demanded changes
greatly as price
changes
i.e. Cereal
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Elastic Demand
Slight change in price
causes HUGE drops in
demand.
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Inelastic Demand
2. Inelastic—quantity
demanded changes
little as price
changes
i.e. Gas
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Inelastic Demand
Slight changes in price
does little for demand
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Difference between elastic and inelastic
demand:
Elastic demand- when a small change in a product’s
price results in a significant change in the quantity
demanded (i.e. price of pizza)
Inelastic demand- when a change in a product’s price
has only a slight effect on the quantity demanded
(i.e. salt & gas)
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What Determines Elasticity?
Three KEY CONCEPTS affect elasticity of
demand
1. availability of substitutes
2. proportion of income spent on good
or service
3. whether product is a necessity or
luxury
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What Determines Elasticity?
FACTOR 1 Substitute Goods or Services
• If no substitute for a product, demand tends to be
inelastic
– when price of insulin goes up, diabetics still need the
same amount
• If there are substitutes for a product, demand tends to be
elastic
– when price of beef goes up, consumers can buy other
meats
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What Determines Elasticity?
FACTOR 2 Proportion of Income
• Demand for expensive items tends to be elastic
– if percentage of income needed to buy item
increases, demand decreases
• Demand for inexpensive items tends to be inelastic
– rise in price requires small additional part of
income
• Rise in income can lead to greater demand for some
goods or services
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What Determines Elasticity?
FACTOR 3 Necessity or Luxury
• Necessity—something needed for life
– demand for necessities is inelastic
• Luxury—something desired but not essential
– demand for luxuries tends to be elastic
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Total Revenue Test
KEY CONCEPTS
Total revenue- amount of money company gets for selling
its products
– Formula: TOTAL REVENUE = P (price) x Q (quantity sold)
Total revenue test- shows total revenue from item at
various prices
– if total revenue increases after price drops, demand
is elastic
– if total revenue decreases after price drops,
demand is inelastic
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Total Revenue Test
EXAMPLE: Revenue Table
• Revenue table shows
elasticity of demand by
listing
– prices at which item
can be sold
– quantity of item
demanded at each
price
– total revenue received
from sale of item at
each price
Valdosta
Stadium
Cinemas
Quantity
Total
Demanded Revenue
($)
$13
1500
19,500
$11
2000
22,000
$9
8000
72,000
$6
11000
66,000
$4
17000
68,000
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Closure Activity #10
Complete the Total Revenue Table and determine if
the item is elastic or inelastic.
Price of Greebes
Quantity Demanded
$20
295
$18
300
$16
325
$12
375
$9
400
Circle one
Elastic
Total Revenue
($)
Inelastic
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Show What You Know!
Georgia Milestone Practice Question
If the price of milk increases slightly, the demand for milk
will NOT change very much. This market situation is an
example of
Demand elasticity
Demand inelasticity
Supply elasticity
Supply inelasticity
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Show What You Know!
Georgia Milestone Practice Question
If the price of new cars decreases slightly, the demand for
new cars is likely to increase greatly. This market
situation is an example of
Demand elasticity
Demand inelasticity
Supply elasticity
Supply inelasticity
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THE END
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
Any Questions?
65NEXT
Chapter 4 TEST Tomorrow!!
Demand
Law of demand
Demand schedule
Determinant of
Demand
Demand curve
Market demand curve
Law of diminishing
marginal utility
Income effect
Substitution effect
Normal goods
Inferior goods
Substitutes
Complements
Elasticity of demand
Elastic
Inelastic
Total revenue test
Purchasing Power
**Be able to shift the
demand curve left or
right.
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