Bell Ringer!!!

Tell me a story about a time you got a REALLY good deal on an item you bought. What was the item, original price, circumstances of the price you

paid, etc.?

In the Chips Simulation Debrief

Take out a sheet of paper!Answer the following questions based on your experience

during the simulation:1. What was the goal of buyers?2. What was the goal of sellers?3. How was a transaction price determined?4. From round one to round four, did the amount of time it took you to make

a transaction increase or decrease? Why do you think this is?

5. Explain which concepts from this game can be applied to a free market system.

Dwight Schrute says:

“Fact: the demand for Dunder-Mifflin paper is low. I think this is because people don’t make as many paper airplanes as they used to.”

Understanding Demand

What is Demand?

The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period

The Law of Demand

As the price of a good increases, the quantity demanded of the good decreases, and as the price of a good decreases, the quantity demanded of the good increases If P then Qd If P then Qd Where P = price and Qd = quantity demanded

BLACK FRIDAY!

Demand vs. Quantity Demanded

Quantity demanded is the number of units of a good purchased at a specific price

Buying Makes Me Happy!

Utility is the quantity of satisfaction or happiness you receive from a unit of good The more utility you receive from a unit of a

good, the higher price you are willing to pay for it;

The less utility you receive from a unit of a good, the lower price you are willing to pay for it.

Law of Diminishing Marginal Utility

Who likes CIRCUS PEANUTS?!?!?! I mean, REALLY likes them…

Law of Diminishing Marginal Utility

Experiment! Student eats 1st circus peanut and assigns # of

utils (happiness) he/she gained Student eats 2nd circus peanut and assigns utils Student eats 3rd…4th…87th…etc.

Why do P and Qd Move in Opposite Directions?

The law of diminishing marginal utility states that as a person consumes additional units of a good, eventually the utility gained from each additional unit of good decreases The first piece of pizza is the best! Or your first private jet?

Thus, individuals will buy larger quantities of a good only at lower prices. Girl eats her feelings (Investopedia video) http://www.investopedia.com/video/play/law-of-diminishing-marginal-utility/

Law of Demand in Numbers

The demand schedule is the numerical representation of the law of demand

Price (in dollars) Quantity demanded (in units)

$4 1

3 2

2 3

1 4

Law of Demand in Pictures

The demand curve is the graphical representation of the law of demand

The standard practice in economics is to call the graphic representation of the relationship between price and quantity demanded a demand curve—whether it is a curve or straight line

Individual and Market Demand Curves

An individual demand curve represents an individuals demand

A market demand curve shows the sum of all the different individual demand curves added together