Understanding Markets: Exploring Demand Dynamics and Utility Principles
Delve into the concepts of demand, price elasticity, and marginal utility to understand how consumer preferences shape market dynamics. Explore essential vocabulary and questions to grasp the intricacies of economic choices.
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Presentation Transcript
Unit 2 Understanding Markets CHAPTERS 4, 5, 6, & 7
Demand CHAPTER 4
What is Demand? LESSON 1
Lesson 1: What is Demand? Bellringer: What is a product or service you think is in high demand in society right now? Essential Vocabulary: prevail, inversely, demand, micro economics, demand schedule, incentive, Law of Demand, market demand curve, marginal utility, diminishing marginal utility Essential Question: How does demand help societies determine what, how and for whom to produce?
An Introduction to Demand - Demand is the desire, ability, and willingness to buy a product. - An individual demand curve illustrates how the quantity that a person will demand varies depending on the price of a good or service. - Economists analyze demand by listing prices and desired quantities in a demand schedule (chart). When the demand data is graphed, it forms a demand curve with a downward slope. turn
Discussion Question Think about something you have been wanting to buy. What is its price? At what price would you be willing to buy the item?
The Law of Demand - The Law of Demand states that the quantity demanded of a good or service varies inversely with its price. When price goes up, the quantity demanded goes down; when price goes down, the quantity demanded goes up. - A market demand curve illustrates how the quantity that all interested persons (the market) will demand varies depending on the price of a good or service.
Discussion Question Why is price a consumer s obstacle to buying?
Demand and Marginal Utility - Marginal utility is the extra usefulness or satisfaction a person receives from getting or using one more unit of a product. - The principle of diminishing marginal utility states that the satisfaction we gain from buying a product lessens as we buy more of the same product.
Complete Chapter 4 Lesson 1 questions Pg.106 #1,2, and 6.
Factors Affecting Demand Lesson 2 Bellringer: What is the relationship between price and demand? Essential Vocabulary: principle, illustrate, change in quantity demanded, income effect, substitution effect, change in demand, substitutes, complements Essential Question: What is the cause in a change in demand?
Change in the Quantity Demanded - The change in quantity demanded shows a change in the amount of a product purchased when there is a change in price. - The income effect means that as prices drop, consumers are left with extra real income. - The substitution effect means that price can cause consumers to substitute one product with another similar but cheaper item.
Discussion Question Imagine you have a weekly budget for groceries. When you shop one week, certain items you needed were on sale, and after you paid the cashier, you had $20 left. What would you do with the extra money?
Change in Demand - A change in demand is when people buy different amounts of the product at the same prices. As a result, the entire demand curve shifts-to the right to show an increase in demand or to the left to show a decrease in demand for the product. Therefore, a change in demand results in an entirely new curve. - A change in demand can be caused by a change in income, tastes, a price change in a related product (either because it is a substitute or complement), consumer expectations, and the number of buyers. pg.110
Elasticity of Demand LESSON 3
Ch.4 Lesson 3: Elasticity Bellringer: Is there anything that you would still buy even if it got more expensive? Essential Vocabulary: technical, adequate, elasticity, demand elasticity, elastic, inelastic, unit elastic Essential Question: What are the causes in a change in demand?
Demand Elasticity A. Elasticity measures how sensitive consumers are to price changes. B. Demand is elastic when a change in price causes a large change in demand. (luxury) C. Demand is inelastic when a change in price causes a small change in demand. (necessary) D. Demand is unit elastic when a change in price causes a proportional change in demand. pg. 116 & 117
The Total Expenditures Test A. Price times quantity demanded equals total expenditures. Price of product x Quantity = total expenditures B. Changes in expenditures depend on the elasticity of a demand curve if the change in price and expenditures move in opposite directions on the curve, the demand is elastic; if they move in the same direction, the demand is inelastic; if there is no change in expenditures, demand is unit elastic. C. Understanding the relationship between elasticity and profits can help producers effectively price their products.
Determinants of Demand Elasticity Demand is elastic if the answer to the following questions are yes. A. Can the purchase be delayed? Some purchases cannot be delayed, regardless of price changes. B. Are adequate substitutions available? Price changes can cause consumers to substitute one product for a similar product. C. Does the purchase use a large portion of income? Demand elasticity can increase when a product commands a large portion of a consumer s income.
Total Expenditures x = Total Expenditures
-Complete lesson 3 questions page 119 numbers 1-6 - Pg.123-124 #s 5,6,& 15
Chapter 4 Assessment page 123-124 numbers 1-19
