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“ Word Up” Chapter 4

“ Word Up” Chapter 4. Take two pieces of paper and line them up, a top and bottom. Cut ten foldable windows on the colored paper and then clue the sheets together. On the outside write the word, on the inside write the definition. . Key Terms:. demand law of demand purchasing power

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“ Word Up” Chapter 4

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  1. “Word Up” Chapter 4 Take two pieces of paper and line them up, a top and bottom. Cut ten foldable windows on the colored paper and then clue the sheets together. On the outside write the word, on the inside write the definition.

  2. Key Terms: • demand • law of demand • purchasing power • income effect • substitution effect • complimentary good • substitute good • diminishing marginal utility • elastic demand • inelastic demand

  3. DEMAND Chapter 4

  4. Demand(D) • Demand is the amount of goods & services consumersare willing or areableto buy. Mommy I Demand, Demand, Demand! • Price (P) how much an item is selling for. DEMAND CURVE D1 D2 • Quantity Demanded (QD) the total amount of goods/services in demand. P QD1 QD2

  5. The Demand Curve Shifts • When (D) for a product changes for • reasons other than price, the (D) curve • shifts left or right. • If the Demand curve shifts right, there • is an increase in (D) at any prices. • If the (D) curve shifts left, Demand decreases at all prices. D1 A Demand curve measures the number of goods bought and at how much. The demand Curve is only accurate as long as there are no changes other than price. D2 P QD1

  6. The Laws of Demand • an Increasein price = a decrease in the Quantity Demanded at that price. = QD = QD • a Decreasein price = an increase in . the quantity demanded at that price.

  7. 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

  8. What explains the Law of Demand? • Purchasing power - the amount of goods & services consumers can buy with their available income. • Income effect- a change in consumption resulting from a change in consumer income or a product price. • higher price = lower power (I . can’t buy as much) • lower price = higher power (I can . buy more)

  9. Change in Income Used Cars New Cars D1 D2 Less income results in more demand for used cars; less demand for new cars. More income results in more demand for new cars; less demand for used cars. P QD1 QD2

  10. 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) Cheaper no name brand? Or name brand?

  11. Other limits on 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 $399 Buy it now to save money!!!! we will raise the price back to $599 in 3 weeks.

  12. Elasticity of Demand • Elasticity of Demand – the measure of how people react to Price change. • In-elastic Demand– 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. I’m running a sale ladies

  13. Elasticity of Demand • Elastic Demand-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.

  14. The End

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