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A Lesson on Demand

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... Determinants con t Preference/Taste Likes and dislikes in consumption Consumer Expectations Change in future price of goods ... (hamburgers and french ... – PowerPoint PPT presentation

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Title: A Lesson on Demand


1
A Lesson on Demand
2
What is Demand?
  • Willing and able to purchase a product at a
    particular price
  • How many of you would like a Porsche or like
    vehicle?
  • How many of you are able?
  • Whats the difference between willing and able?
  • Idea of time and place at this time, you may be
    willing to buy a Porsche, but are not able,
    therefore you do not have a DEMAND for a Porsche

3
Example Demand for lolipops
Totals
10
20
30
40
50
4
Demand Schedule
  • A table that lists at various prices, the number
    of items demanded
  • Demand Curve the graphic representation of
    demand
  • Graphing a Demand Schedule
  • The lower left quadrant is 0
  • The vertical axis is price
  • The horizontal axis is quantity

Graph the numbers from the Lollipop Demand
Schedule
5
Law of Demand
  • As price falls, the quantity demanded increases.
    As the price rises, the quantity demanded
    decreases
  • P QD

Price per gallon of water Bottles per week
Jo Pat
.74 90 50
.50 130 70
.36 180 100
.28 290 130
6
Change in Quantity Demanded vs. Change in Demand
  • Change in Quantity Demanded
  • Caused by change in own price of good
  • Movement along the curve
  • Change in Demand
  • Caused by Change in determinant of demand
  • Shift to new demand curve

7
Demand Determinants
  • Income
  • Normal Good a good for which demand increases as
    consumer incomes rise (milk)
  • Inferior Good A good for which demand decreases
    as consumer incomes rise (ground chuck, bus
    rides)
  • As income rises consumers tend to switch from
    consuming these inferior goods to consuming
    normal goods (ex. steak, car/plane)

8
Determinants cont
  • Preference/Taste
  • Likes and dislikes in consumption
  • Consumer Expectations
  • Change in future price of goods
  • Change in future income
  • Population Change
  • As the number of consumers in a market changes
    the demand will change

9
Determinants cont
  • Prices of Related Goods
  • Substitutes Goods that are related in such a way
    that an increase in the price of one leads to an
    increase in the demand for the other goods that
    can be consumed in place of one another (Pepsi
    and Coke)
  • Compliments Goods that are related in such a way
    that an increase in the price of one leads to a
    decrease in the demand for the other goods that
    are normally consumed together (hamburgers and
    french fries)
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