# Economics 1509 http:students.resa.netmilewski - PowerPoint PPT Presentation

PPT – Economics 1509 http:students.resa.netmilewski PowerPoint presentation | free to view - id: 16566-Mjk1Z

The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
Title:

## Economics 1509 http:students.resa.netmilewski

Description:

### It has a similar effect of a pay raise if prices remain the same. ... menu to \$1.99 you may choose to substitute Wendy's food with McDonalds \$1.19 menu. ... – PowerPoint PPT presentation

Number of Views:46
Avg rating:3.0/5.0
Slides: 46
Provided by: CSDU9
Category:
Tags:
Transcript and Presenter's Notes

Title: Economics 1509 http:students.resa.netmilewski

1
Economics 1/5/09 http//students.resa.net/milewsk
i
• OBJECTIVE Demonstration of Chapter3 and begin
examination of demand.
• -attendance
• -distribution of test
• -Journals 1-12 Due at the end of class!
• II. Chapter3 Test
• III. Journal 12 pt.A
• -Read Profiles in Economics p.94
• IV. Journal 12 pt.B
• -notes on demand

2
Calculator
• BRING YOUR CALCULATOR THIS WEEK!!!!

3
What is demand?
• Demand the desire, ability, and willingness to
• In a market economy, you compete with other
consumers who demand the same products as you.
• If a lot of people demand the same product, the
price will rise.
• If there are a lot of the same product, and very
few people who demand it, the price will fall.

4
Demand Schedule
• demand schedule - a listing that shows the
various quantities demanded of a particular
product at all prices that might prevail in the
market at a given time.

5
Demand Curve
• demand curve - a graph showing the quantity
demanded at each and every price that might
prevail in the market.

6
Simplistic view of demand
• As price increases, demand decreases
• As price decreases, demand increases
• This is an inverse relationship
• When an inverse relationship is graphed, the
slope is negative

7
Marginal Utility
• Utility the amount of usefulness or
satisfaction that someone gets from the extra use
of a product
• Marginal utility the extra usefulness or
satisfaction a person gets from acquiring or
using one more unit of a product

8
Diminishing Marginal Utility
• The more and more of a product we acquire, the
extra satisfaction we get from using additional
quantities of a product begins to diminish.

9
Example 1
• How much satisfaction would you get from this?

10
Example 1
• How much satisfaction would you get from this?

11
Example 1
• How much satisfaction would you get from this?

12
Example 2
13
Example 2
14
Example 2
15
Demand Changes
• Change in quantity demanded movement along the
demand curve
• Change in demand shift in the demand curve

16
Economics 1/6/09 http//students.resa.net/milewsk
i
• OBJECTIVE Examine the factors that affect
demand.
• I. Journal 13 pt.A
• II. Return of Chapter3 Test
• III. Journal 13 pt.B
• -notes on demand changes
• NOTICES
• -Bring a calculator this week
• -Progress Reports printed tomorrow.

17
Demand Changes
• Change in quantity demanded movement along the
demand curve
• Change in demand shift in the demand curve

18
Change in Quantity Demanded
• When a change in price causes a change in
quantity demanded.
• In this case, a lower price leads to an increase
in quantity demand.

19
Change in quantity demanded
• Income effect the change in quantity demanded
because of a change in price alters consumers
real income.
• Substitution effect the change in quantity
demanded because of a change in the relative
price of a product

20
Example of the income effect
• If the price of a movie drops from 9 to 3, you
might see more films because you have to work 2/3
less than you did before to see one movie.
• When the price of goods and services drop and
has a similar effect of a pay raise if prices
remain the same.

21
Example of the substitution effect
• If Wendys raised the price of their .99 extra
value menu to 1.99 you may choose to substitute
Wendys food with McDonalds 1.19 menu.

22
Change in Demand
• When there is no change in price, but there is a
change in the amount demanded at each and every
price level.
• In this case, price didnt change but more was
demanded.

23
Change in Demand
• Consumer income as income goes up, the amount
of goods and services you can buy also goes up
• Consumer tastes advertising, news reports, and
style changes cause consumers to demand more or
less of a product
• Substitutes products that can be used in place
of other products i.e. butter/margarine

24
• Complements goods that increase our use of
other goods
• Change in expectations the willingness to buy
more or less of a product based on future
predictions
• Number of consumers as more consumers enter the
market demand curve will shift to the right
vice versa.

25
Change in Demand v. Change in Quantity Demanded
26
Complements
• What are the complements for Tony the Tiger?
• If Larrys Foodland put milk on sale, what might
this do to Tony the Tiger?

http//americanheritage.us/Images/CAT_966941.jpg
27
How Milk Prices affect Tony
Cereal
Milk
• The decrease in the price of milk will increase
the demand for cereal.

28
Substitutes
• What are the substitutes for this Fabio endorsed
product?
• What would happen if Larrys Foodland increased
the price of butter?

http//images.amazon.com/images/P/B00032CDPA.01-A3
CDPEGSIQM61V._SCLZZZZZZZ_.jpg
29
How higher butter prices help Fabio
Margarine
Butter
• An increase in the price of butter will increase
demand for the substitute good, I Cant Believe
Its Not Butter

30
Economics 1/7/09 http//students.resa.net/milewsk
i
• OBJECTIVE Examine demand elasticity.
• I. Journal 14 pt.A
• 1.) How did Amazon start?
• 2.) Why has Amazon been so successful?
• 3.) What are Amazons plans for the future?
• II. Journal 14 pt.B
• -notes on elasticity
• III. Math Practice
• -complete worksheet on demand

31
Elasticity
• Elasticity a measure of responsiveness that
tells how a dependent variable such as quantity
responds to an independent variable such as
price.
• 3 Types of Demand Elasticity
• -Elastic Demand
• -Inelastic Demand
• -Unit Elastic Demand

32
Elastic Demand
• A small change in price causes a big change in
quantity demanded.
• Slope is less than -1
• Example
• -fresh foods (green beans, tomatoes, apples)

33
Inelastic Demand
• A big change in price causes a small change in
quantity demanded.
• Slope is greater than -1
• Examples
• -table salt
• -gasoline

34
Unit Elastic Demand
• Any change in price causes a proportional change
in quantity demanded.
• Slope equals -1

35
Total Expenditure Test
• To determine total expenditure, multiply the
price of a product by the quantity demanded for
any point along the demand curve.
• Example
• -at 20 quantity demanded is 5
• -formula p x q total expenditure
• 20 x 5 100
• By selecting two points along the demand curve,
the elasticity of demand can be determined.

36
Determining Elasticity
37
Elasticity Formulas
• Formula to determine elasticity
• change in Q elasticity
• change in P
• Formula to determine change in P or Q
• (NEW P or Q) 1 decimal equivalent
• (OLD P or Q)
• Move decimal two places to the right to get
change in P or Q.

38
Example 1
• The manufacturer of a pain medication reduces the
price for medication by 30 and the percent
change in quantity demanded is 30. What is the
elasticity for the pain medication?
• change in Q 30
• change in P -30
• Elasticity -1

39
Example 2
• A Chinese Buffet increased prices from 4.95 all
you can eat to 5.95 all you can eat. The number
of big eaters went from 58 to 36. What is the
elasticity for All You Can Eat Chinese?
• First we need to figure out the change in P
the change in Q.

40
Chinese Buffet
• change in P
• NEW P 5.95
• OLD P 4.95
• (5.95) 1
• (4.95)
• .20
• 20
• change in Q
• NEW Q 36
• OLD Q 58
• (36) 1
• (58)
• -.37
• -37

41
Chinese Buffet
• change in Q -37
• change in P 20
• -37
• 20
• Elasticity -1.85
• The elasticity for the Chinese Buffet is elastic

42
If you owned the Chinese Buffet, would you keep
the price of the Buffet at 5.95?
• 5.95 x 36 214.20
• 4.95 x 58 287.10

43
Example 3
• The managers of a rock band plan to give a
concert in an auditorium that seats 800 people.
They believe that they can sell 600 tickets at
20 each or 800 tickets at 15 each.
• Create a demand schedule and a demand curve for
concert tickets. Then, using the total
expenditure test, determine the elasticity and
advise the managers on how much they should
charge for the concert.

44
Economics 1/8/09http//students.resa.net/milewski
• OBJECTIVE Working with demand elasticity.
• -attendance
• II. Math Practice with Economics
• III. Working with Demand
• -change in demand v. change in quantity demanded
• IV. Demand Quiz

45
Economics 1/9/09 http//students.resa.net/milewsk
i
• OBJECTIVE Examine the concepts of demand,
change in demand, change in quantity demanded,
and elasticity.