ISS Unit 5

1
ISS Unit 5

• Supply Demand

2
Demand

• Thirsty?
• How many of you are willing to buy a 20 ounce
  bottle of Pepsi for 1.00?
  
• How many of you are willing to buy a bottle of
  Pepsi for .30?
  
• Your willingness to buy the drink at both prices
  is called your DEMAND!

3
Demand Definition

• The amount of goods and services that buyers
  (you) would be ready, willing and able to
  purchase at a given time.

4
Law of Demand

• As the price of Pepsi goes UP, the DEMAND goes
  DOWN.

5
Demand Graph

• Graph the following demand at each price for
  bottles of Pepsi.
  
• .90 - 10 bottles
• .80 - 20 bottles
• .70 - 30 bottles
• Follow the same trend until .40 - 60 bottles

6
View Graph
7
Demand Curve Facts

• Notice that the demand curve
• Has a downward slope
• Shows that when the price decreases, quantity
  demanded increases, and vice-versa, provingTHE
  LAW OF DEMAND!
  
• Change in PRICE ONLY causes a movement of points
  along the Demand Curve
  
• This is called the CHANGE IN THE QUANTITY
  DEMANDED.

8
Diminishing Marginal Utility

• The last item consumed will be less satisfying
  than the one before
  
• The fifth Pepsi you drink will be less tasty than
  the first!

9
Changes in Demand

• Factors OTHER THAN PRICE causes a shift in the
  demand curve to the Right or Left.
  
• So, demands change even if price stays the same.
  
  
• D1 Increase in Demand
• Line moves to the right
• D2 Decrease in Demand
• Line moves to the left

10
View Graph
11
What factors Cause Change in Demand?

• Remember TIRE
• T Taste
• I Income
• R Related Product Price
• E Expectations
• Number of buyers

12
Taste

• Peoples tastes change even when price does not.
• Change in ones tastes have a major impact on
  demand for a good.
  
• If buyers prefer drinks with more sugar demand
  will increase.
  
• If buyers prefer drinks with less sugar demand
  will decrease.

13
Income

• The amount of money people make effects how much
  they demand.
  
• Make more money, demand more at the same prices.
• Make less money, demand less at the same prices

14
Related Product Price

• Just about everything you demand has competition.
  So
  
• If the price of Hollister jeans increases more
  American Eagle jeans will be demanded.
  
• If the price of Hollister jeans decreases less
  American Eagle will be demanded.
  
• Remember, this happened and the price of American
  Eagle jeans remained the same!

15
Expectations

• Peoples demands change due to their expectations.
  
  
• If the weather man predicts a HOT summer, the
  demand for Pepsi will increase.
  
• If the weather man predicts a COOL summer, the
  demand for Pepsi will decrease.
  
• If Jessica Alba wears Hollister Jeans the demand
  will increase
  
• If Barbara Walters wears Hollister Jeans the
  demand will decrease

16
Number of Buyers

• The United States is the largest pork eating
  nation in the world.
  
• Thus, the USA has a large demand for pork.
• In Pakistan the majority of the population is
  Muslim where it is taboo to eat pork.
  
• Thus, Pakistan has a small demand for pork.