lesson 5 life is demanding - power point - duke

Life is Life is DemandingDemanding

Demand = ConsumersDemand = ConsumersTwo Factors that need Two Factors that need

to be considered:to be considered:

1. Willing1. Willing

2. Able ($)2. Able ($)

LAW OF DEMANDLAW OF DEMANDAs Price Falls…As Price Falls…

… …Quantity Demanded RisesQuantity Demanded Rises

As Price Rises…As Price Rises…

… …Quantity Demanded FallsQuantity Demanded Falls

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PriceQuantity

Demanded

Graph out the following demand curve for Flaming Hot Cheetos:Graph out the following demand curve for Flaming Hot Cheetos:

PricePrice Quantity DemandedQuantity Demanded

5.005.00 100100

4.504.50 150150

4.004.00 200200

3.503.50 250250

3.003.00 300300

2.502.50 350350

2.002.00 400400

Know this difference: Know this difference:

Change in Quantity Demanded- movements along theChange in Quantity Demanded- movements along the

demand curvedemand curve

Change in Demand- an entire shift in the demand curveChange in Demand- an entire shift in the demand curve

D

4.00

3.00

2.00

100 150

Change in Qty Demanded

D1

Change in Demand

A

B

Changes in Demand = Changes in Demand = ““ShiftersShifters””

1. 1. SubstitutesSubstitutes:: A A competing company competing company makes a similar makes a similar product that is less product that is less expensive causing expensive causing demand for your item demand for your item to decrease.to decrease.

SubstitutesSubstitutes

7

SubstitutesSubstitutes

8

SubstitutesSubstitutes

9

SubstitutesSubstitutes

10

SubstitutesSubstitutes

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2.2.Preferences/ Preferences/ Advertising/ MediaAdvertising/ Media

Some items become Some items become the the ““trendytrendy”” must must have item. Millions have item. Millions of dollars are spent of dollars are spent letting consumers letting consumers know about the know about the benefits of their benefits of their product, therefore product, therefore the demand may the demand may increase.increase.

ex. Seasonal ex. Seasonal itemitem

Summer of the Summer of the Shark!!!!!Shark!!!!!

3. Income level of consumers3. Income level of consumers

When a consumer has more or When a consumer has more or less money, they will less money, they will demand more or less.demand more or less.

1515

The incomes of consumer change the demand, but how depends on the type of good.

Each week you go to your favorite burger place. The price of aEach week you go to your favorite burger place. The price of a

burger has increased, but the price of a chicken sandwich staysburger has increased, but the price of a chicken sandwich stays

the same. Over the course of the week you generally buy boththe same. Over the course of the week you generally buy both

burgers and chicken sandwiches.burgers and chicken sandwiches.

1. How will the increase in the price of burgers affect your 1. How will the increase in the price of burgers affect your purchase of burgers?purchase of burgers?

-you will buy fewer burgers because they are now -you will buy fewer burgers because they are now relatively more expensive than chicken sandwichesrelatively more expensive than chicken sandwiches

2. Describe how the 2. Describe how the substitution effectsubstitution effect changes your purchases. changes your purchases.

-because the price of burgers increased, chicken is now -because the price of burgers increased, chicken is now less less expensive. Therefore, you substitute chicken for burgers expensive. Therefore, you substitute chicken for burgers and and buy more chicken and fewer burgersbuy more chicken and fewer burgers

4. 4. Complimentary Goods:Complimentary Goods: Two goods bought and used Two goods bought and used together. Price of one affects the other. together. Price of one affects the other.

BindingsBindings SnowboardSnowboard

Can you think of others?Can you think of others?

5. 5. Expectations:Expectations: If you If you expect a higher expect a higher price next week price next week you will buy the you will buy the item today. If item today. If you think the you think the item will go on item will go on sale you will sale you will wait until the wait until the sale to make your sale to make your purchasepurchase..

Shifts in DemandShifts in Demand(SPICE = Shifters of the demand curve Right or (SPICE = Shifters of the demand curve Right or

Left)Left)

1.1.SSubstitutes ubstitutes

2.2.PPreferences and Advertisingreferences and Advertising

3.3. IIncome Levelncome Level

4.4.CComplimentsompliments

5.5.EExpectationsxpectations

PracticePractice

2020

First, identify the determinant (shifter) then decide if demand will increase or decrease

Shifter Less/More Left or Right1

2

3

4

5

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

21

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

22

Shifter Less/More Left or Right1 Income Level

2

3

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

23

Shifter Less/More Left or Right1 Income Level Less

2

3

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

24

Shifter Less/More Left or Right1 Income Level Less Left

2

3

4

5

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will Hamburger restaurants announce that they will

significantly increase prices NEXT month significantly increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

25

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

26

Shifter Less/More Left or Right1 Income Level Less Right

2 Substitute

3

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

27

Shifter Less/More Left or Right1 Income Level Less Right

2 Substitute Less

3

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

28

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3

4

5

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

29

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

30

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

31

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less

4

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

32

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4

5

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

33

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

34

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

35

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More

5

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

36

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

37

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

38

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

39

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More

6

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

40

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

41

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

42

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

43

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More

7

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

44

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

45

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

46

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

47

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level More

8

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

48

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level More Right

8

PracticePractice

Hamburgers (a normal good)Hamburgers (a normal good)

1.1. American incomes fall due to recessionAmerican incomes fall due to recession2.2. Price for Carne Asada burritos falls to $1 Price for Carne Asada burritos falls to $1 3.3. New health craze- “No ground beef” hits HollywoodNew health craze- “No ground beef” hits Hollywood4.4. Hamburger restaurants announce that they will significantly Hamburger restaurants announce that they will significantly

increase prices NEXT month increase prices NEXT month 5.5. Price of fries and shakes drops 50%Price of fries and shakes drops 50%6.6. Advertising campaign starring Brad PittAdvertising campaign starring Brad Pitt7.7. Tax cuts give Americans more moneyTax cuts give Americans more money8.8. Child dies from tainted beef….News at 11:00Child dies from tainted beef….News at 11:00

First identify the determinant (Shifter). Then decideif demand will increase or decrease. Next, whichdirection will demand curve shift?

49

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

50

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level More Right

8 Advertising

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

51

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level More Right

8 Advertising Less

PracticePracticeFirst, identify the determinant (shifter) then

decide if demand will increase or decrease

52

Shifter Less/More Left or Right1 Income Level Less Left

2 Substitute Less Left

3 Preferences Less Left

4 Expectations More Right

5 Complimentary More Right

6 Advertising More Right

7 Income Level More Right

8 Advertising Less Left

Check for UnderstandingCheck for Understanding

1.1. What is the law of demand?What is the law of demand?

2. What is the difference between a change in 2. What is the difference between a change in quantity demanded and a change in demand?quantity demanded and a change in demand?

3. What is the difference between a normal and 3. What is the difference between a normal and inferior good?inferior good?