demand and supply demand and supply demand chapter 4

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Chapter 4 Demand and Supply

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  • Slide 1
  • Slide 2
  • Demand and Supply Demand and Supply
  • Slide 3
  • DEMAND Chapter 4
  • Slide 4
  • D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2 Demand is the amount of goods & services consumers are willing or are able to buy. PPPPrice (P) how much an item is selling for. Quantity Demanded (QD) the total amount of goods/services in demand. DEMAND CURVE
  • Slide 5
  • A Demand curve measures the number of goods bought and at how much. When (D) for a product changes for reasons other than price, the (D) curve reasons other than price, the (D) curve shifts left or right. shifts left or right. D1 D1 D1 D1 D2 D2 D2 D2 If the Demand curve shifts right, there is an increase in (D) at any prices. is an increase in (D) at any prices. P If the (D) curve shifts left, Demand decreases at all prices. QD 1
  • Slide 6
  • The Law of Demand an Increase in price = a decrease in the Quantity Demanded at that price. = QD a a a a Decrease in price = an increase in. the quantity demanded at that price. = QD
  • Slide 7
  • What explains the Law of Demand? I Income effect- a change in consumption resulting from a change in consumer income or a product price. P Purchasing power - the amount of goods & services consumers can buy with their available income. hhigher price = lower power (I. cant buy as much) llower price = higher power (I can. buy more)
  • Slide 8
  • D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2 More income results in more demand for new cars; less demand for used cars. New Cars Used Cars Less income results in more demand for used cars; less demand for new cars.
  • Slide 9
  • Substitution effect ( must be comparable to the original) Substitution effect a change in price of the product causes a consumer to react by buying a different good. ( must be comparable to the original) Substitute good- - Substitute good- is used in place of the original. Complimentary good - Complimentary good is used with another good. Cheaper no name brand? Or name brand?
  • Slide 10
  • There are 17 key words in chapter 4. Go through the chapter, find each of the 17 key words, and provide a definition of each word. *Pictures are optional* 9
  • Slide 11
  • Elasticity of Demand Elasticity of Demand - measure of how people react to price change. In-elastic Demand the change in price of a product has little effect on demand for it - Why: * the product is a necessity * ** * few substitutes are available * ** * the price is a small part of. consumer income Im running a sale ladies
  • Slide 12
  • Elasticity of Demand - How does the change in price affect the Demand for a product? EEEElastic D- a change in price can cause a major change in (D) at that price: * The product is not a necessity. * Substitutes are available. * The price is a large part of consumer. Income.
  • Slide 13
  • Elasticity= Percentage change in quantity demanded __________________________________ Percentage change in price Percentage Change = Original Number New Number ____________________________ Original Number X 100
  • Slide 14
  • Values Greater than 1 indicate elasticity (The change in price causes a change in demand.)
  • Slide 15
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  • Slide 17
  • What impacts Demand besides price? 16 Relative Importance Prescription Medication Clothes Milk Necessity v. Luxury Gasoline v. Candy bars Clothes v. hair gel Availability of Substitutes Coke vs. Pepsi Fruit Loops v. Publix Brand Fruit Rings Ferrari v. Honda
  • Slide 18
  • Determinants of Demand -Reasons for changes in (D)emand- other than the price of an item Income of consumers Number of consumers Tastes & preferences Price of related goods Expectations of consumers Buy it now to save money!!!! $399
  • Slide 19
  • Diminishing Marginal Utility The more a product is used, the less value it has to the consumer & (D)emand decreases. Demand is not unlimited- at some point usefulness or desire for the product decreases. I am sick of milk
  • Slide 20
  • Slide 21
  • Ups and Downs 20
  • Slide 22
  • Surging Hispanic Economy 21