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Demand

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CHAPTER 3 Demand SECTION 1: Nature of Demand SECTION 2: Changes in Demand SECTION 3: Elasticity of Demand * Objectives: How does demand differ from the quantity demanded? – PowerPoint PPT presentation

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Title: Demand


1
Demand
CHAPTER 3
  • SECTION 1 Nature of Demand
  • SECTION 2 Changes in Demand
  • SECTION 3 Elasticity of Demand

2
Objectives
SECTION 1
Nature of Demand
  • How does demand differ from the quantity
    demanded?
  • What does the law of demand state?
  • What do demand schedules and demand curves
    illustrate?

3
Difference between demand and the quantity
demanded
SECTION 1
Nature of Demand
  • demandconsumer demand at various prices
  • quantity demandedconsumer demand at each
    particular price

4
Law of demand
SECTION 1
Nature of Demand
  • There is an inverse relationship between a
    products price and the quantity demanded.

5
What demand schedules and demand curves
illustrate
SECTION 1
Nature of Demand
  • Demand schedules show in table format
  • the quantity of products consumers are willing to
    buy at a series of possible prices
  • the quantity of products consumers are able to
    buy at a series of possible prices
  • Demand curves show in graph format
  • the data listed in demand schedules
  • the rate of change for demand at each price

6
Objectives
SECTION 2
Changes in Demand
  • What does it mean for a products demand to
    shift?
  • What factors can shift demand for a product?
  • How do substitute goods differ from complementary
    goods?

7
When a products demand shifts, different
quantities of a product are demanded at each and
every price.
SECTION 2
Changes in Demand
8
Determinants of product demand shifts
SECTION 2
Changes in Demand
  • consumer tastes and preferences
  • market size
  • income
  • prices of related goods
  • consumer expectations

9
Difference between substitute goods and
complementary goods
SECTION 2
Changes in Demand
  • substitute goodsused to replace the purchase of
    similar goods when prices increase
  • complementary goodscommonly used with other goods

10
Objectives
SECTION 3
Elasticity of Demand
  • What is demand elasticity?
  • What is the difference between elastic and
    inelastic demand?
  • How is demand elasticity measured?

11
Demand elasticity reflects the extent to which
changes in a products price affect the quantity
demanded by consumers.
SECTION 3
Elasticity of Demand
12
Difference between elastic and inelastic demand
SECTION 3
Elasticity of Demand
  • elastic demandwhen a small change in a products
    price results in a significant change in the
    quantity demanded
  • inelastic demandwhen a change in a products
    price has only a slight effect on the quantity
    demanded

13
Demand elasticity is measured by using the
total-revenue test.
SECTION 3
Elasticity of Demand
14
CHAPTER 3
Wrap-Up
  • 1. State the law of demand in your own words. Be
    sure to include how the income effect, the
    substitution effect, and diminishing marginal
    utility relate to the law of demand.
  • 2. What causes movement along a demand curvein
    other words, a change in the quantity demanded?
    How does this movement differ from a shift in
    demand?

15
CHAPTER 3
Wrap-Up
  • 3. What is the difference between a complementary
    good and a substitute good? Give an example of
    each kind of good for each of these products ice
    cream, baseball game tickets, pencils.
  • 4. Why is determining demand elasticity important
    to business owners? How can business owners
    measure demand elasticity?
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