2. The Law of Demand
As price increases ↑ :
the quantity demanded decreases ↓
● As price decreases ↓ :
the quantity demanded increases ↑
3. Why does the law of Demand
work? 2 factors…
USUALLY…
If price goes up,
you can’t afford
to buy as much
quantity for the
same amount of
money.
If the price
goes up, you
buy an
alternative
(and less
quantity of the
original good).
4. Market Demand Schedule
Willingness to demand (or buy) a good/service
at ALL given prices.
Your graph above is a Market Demand Schedule
Graph
5. Market Demand Schedule
Individual demand schedules get combined into a
market demand schedule.
● Simply a column list of how much quantity a
set of consumers demand at each price.
6. Change in Quantity Demanded:
Just a Move Along the Demand Curve
Movement is based on the Law of
Demand: as price changes,
Quantity
Demanded
changes.
At a price of $1.50, what is the total
quantity of gizmos that this market
demands?
7. CHANGE in Demand:
SHIFT IN THE ENTIRE LINE
Now, at the SAME Price ALL
The sudden you want MORE
or LESS.
Let’s try and see if it works
with our class example.
(Cookies)
8. What Shifts Demand:
1. Consumer Income
Increase income – people buy more;
decrease income – people buy less.
Example: I get a raise so I buy that new car I’ve
been needing!
Example: Class Student hits lottery, buys more
cookies
Demand curve shifts – right if increase and left if
decrease
9. 2. Substitutes
Concerns related/similar product that will be used in
place of another product
Example: buy margarine if price of butter goes up
Note: result is Change in Demand for the substitute
Margarine. Is change in quantity demanded for
original/Butter due to its price changing
THINK:
If Coke prices went up drastically, what would
happen to the Demand of Faygo cola?
10. 3. Expectations (Future)
The way people think about the future –
positive or pessimistic.
Example: Clothing store advertises BIG SALE
NEXT WEEK.
Ex: news of more layoffs, people hold back on
big purchases, luxury items…
Ex: forecast snow storm/snow day and moms
run up to buy milk and rent videos for the kids
11. 4. Consumer Tastes
Change mind of product due to ads, celebrity,
fashion trends/ gets ‘old’, seasonal tastes, hear
something good/ bad about product re: health,
environment…
Example: news story report: health risks of
product
Example: media blitz for
Iphone 6, Iwatch
12. 5. Compliments
Other related goods sold along with a product
Example: when Turkey goes on sale (see change
in quantity demanded for the Turkey) see
Change in Demand for gravy, stuffing,
potatoes…
Example: Demand of Hotdogs if the price of
hotdog buns TRIPLES!
Peanut butter & Jelly
13. 6. Number of Consumers
(Market Size)
Increase in the number of people
with demand for goods/services
Example: population increase due
to immigration
Example: new market opens up –like
China! Huge increase in number of
consumers!
