Chapter 4 Demand

1. Chapter 4Demand Section 1 Understanding Demand

2. Review Economic Systems are the different ways of answering the three fundamental questions in Economics • What to produce? • How much to produce? • Who gets what? In a market system , the interaction of buyers and sellers determines the prices of most goods as well as what quantity a good will be produced.

3. In other words Buyers demand goods + Sellers supply goods = An agreement on the price paid and quantity traded for that price.

4. Important terms • Demand – the desire to own something and the ability to pay for it. • In other words:demandonly happens when a buyer has the income (money) necessary to purchased the desired goods

5. Law of Demand – • When a good’s price goes up, consumers will buy less of it. • When a good’s price is lower, consumers will buy more of it. Price Price Goods Goods

6. Two behavioral patterns effecting Demand: • Substitution Effect – • When Consumers react to an increase in a good’s price by consuming less of that good and more of other goods. • Income Effect – • The change in consumption resulting from a change in real income.

7. Measuring Demand • Demand Schedule – a table that lists the quantity of a good that a person will purchase at each price in a market • Market Demand Schedule – a table that shows the quantities demanded at each price by all consumers in the market.

8. Practice creating a demand schedule • Retrieve the information from your classmates about the price and amount of T – Shirts ordered at that price. • Create a Market Demand Schedule from the information gathered. • Answer the questions regarding the lecture and create an additional demand schedule from the information from the worksheet