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Do Now – How much would you pay for:

Explore the concept of demand and its impact on prices. Learn about the law of demand, substitution and income effects, demand schedules, and market demand curves.

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Do Now – How much would you pay for:

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  1. Do Now – How much would you pay for:

  2. Demand

  3. But I want it…. • Demand is the desire to own something, and the ability to pay for it

  4. The Law of Demand Demand Prices • The Law of Demand says that: • Consumers will buy more of a good when its price is lower, and less when its price is higher Demand Prices

  5. The Sub Effect • When consumers react to an increase in a product’s price by consuming less of that product and more of a substitute product… • The Substitution Effect

  6. The Income Effect • Income Effect: the change in consumption that results when a price increase causes real income to decline • When prices increase, your limited budget just won’t buy as much as it did in the past - It feels as if you have less money • Also works when the price goes down – if the price of gas goes down, all of a sudden you feel like you have more money…

  7. Demand Schedule • The law of demand explains how the price of any item affects the quantity demanded of that item… • To have a demand for a good, you must be willing and able to buy it at the specified price • Demand means that you want the good, and can afford to buy it…

  8. Demand Schedule • Demand Schedule is a table that lists the quantity of a good a person will buy at various prices in a market

  9. Market Demand Schedule • Market Demand Schedule is a table that lists the quantity of a good all consumers in a market will buy at various prices • EX: allows a pizzeria owner to predict the total sales of pizza at several different prices

  10. Sum it up

  11. Sum it up • Demand is the desire to have a good and the ability to purchase it • As a good’s price rises, people demand less of that good; as a good’s price falls, people demand more of that good • If the price of a good increases, consumers will increase their demand for substitute goods; if the price of a good decreases, consumers will decrease their demand for substitute goods • Demand schedules show demand for a good across a range of prices • Demand curves are graphic representations of demand schedules

  12. Get a textbook and answer the following questions. • What happens to demand for a good when the price increases? • What is a market demand curve? • To have demand for a good, what two conditions must be met? • Describe the difference between the substitution effect and the income effect.

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