4.1 The Demand Curve
Objectives
 Explain the law of demand
 Interpret a demand schedule and
demand curve
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
Key Terms
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demand
law of demand
marginal utility
law of diminishing marginal utility
demand curve
quantity demanded
individual demand
market demand
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
3
Demand
Demand indicates how much of a product
consumers are both willing and able to buy
at each possible price during a given
period, other things remaining constant.
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
4
Law of Demand
The law of demand says that quantity
demanded varies inversely with price,
other things constant.
Thus, the higher the price, the smaller the
quantity demanded.
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
5
Law of Demand
Demand, wants, and needs
Substitution effect
Income effect
Diminishing marginal utility
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
6
Demand Schedule
and Demand Curve
Demand versus quantity demanded
Individual demand and market demand
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
Demand Schedule
and Demand Curve for Pizza
Price per
Pizza
7
Quantity
Demanded
per Week
(millions)
a
$15
8
b
12
14
c
9
20
d
6
26
e
3
32
Figure 4.1
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4.1 The Demand Curve
SLIDE
8
Individual Demand for Pizzas
(a) Hector
(c) Chris
(b) Brianna
$12
$12
8
4
8
4
8
4
Price
$12
dH
1 2 3
Pizzas
(per week)
dB
1 2
dC
1
Figure 4.4
CONTEMPORARY ECONOMICS
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4.1 The Demand Curve
SLIDE
9
Market Demand for Pizzas
(d) Market demand for pizzas
dH + dB + dC = D
Price
$12
8
4
1 2 3
6
Pizzas
(per week)
Figure 4.4
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
Objectives
 Identify the determinants of demand, and
explain how a change in each will affect
the demand curve.
 Distinguish between the money price of a
good and the time price of a good.
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
Key Terms
 tastes
 movement along a given demand curve
 shift of a demand curve
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
SLIDE
3
Changes That Can
Shift the Demand Curve
 Changes in consumer income
 Normal goods
 Inferior goods
 Changes in the prices of related goods
 Substitutes
 Complements
 Changes in the size or composition of the
population
 Changes in consumer expectations
 Changes in consumer tastes
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
SLIDE
Movement Along a Demand Curve
Versus a Shift of the Curve
4
A change in price, other things constant,
causes a movement along a demand
curve, changing the quantity demanded.
A change in one of the determinants of
demand other than price causes a shift of
a demand curve, changing demand.
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
SLIDE
5
An Increase in the
Market Demand for Pizza
$15
b
f
Price per pizza
12
9
6
3
0
Figure 4.6
8
14
20
D
32
26
D'
Millions of pizzas per week
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
SLIDE
6
A Decrease in the
Market Demand for Pizza
$15
j
b
Price per pizza
12
9
6
3
0
Figure 4.7
8
14
20
D' D
26 32
Millions of pizzas per week
CONTEMPORARY ECONOMICS
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4.3 Changes in Demand
SLIDE
7
Extensions of Demand Analysis
Role of time in demand
The cost of waiting in line
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