Chapter 7 Section 2
THE DEMAND CURVE AND ELASTICITY OF
DEMAND
DEMAND VS. QUANTITY DEMANDED
Demand is the actual curve that shows what
buyers are willing to buy at a range of prices
 Quantity Demanded is the number of buyers
willing to buy something at a specific price

GRAPHING A DEMAND CURVE
1st you need a
demand schedule
 Demand Schedule:
table showing
quantity demanded
at different possible
prices

Demand for Burgers
Price $
Quantity
Demanded
$1
100
$2
80
$3
60
$4
40
$5
20
$6
0
GRAPHING A DEMAND CURVE CONT.
Demand for Burgers
7

6
 Horizontal
5
PRICE $
2nd set up the
graph
4
D
3
2
1
0
0
20
40
60
80
Quantity Demanded
100
(x) axis
is your quantity
demanded
 Vertical (y) axis is
your price
GRAPHING A DEMAND CURVE CONT.
7
6
5
PRICE $
plot the
points from your
demand
schedule on
your graph
Demand for Burgers
 3rd
4
D
3
2
1
0
0
20
40
60
80
Quantity Demanded
100
FINISHED PRODUCT

Demand Curve: downward sloping line that
shows various quantities demanded at
different prices
CHANGES IN DEMAND

What customers want to buy, and what they are
willing to pay changes due to many factors:
 Changes
in population
 Changes in income
 Changes in tastes/preferences
 Price of substitutes
 Price of complementary goods
CHANGES IN DEMAND
A change in demand
(NOT Quantity
Demanded) means a
change in the demand
curve, causes the curve
to shift right or left
 Increase in Demand
Shift to the right
 Decrease in Demand
Shift to the left

CHANGES IN POPULATION
As population increases, demand increases
 As population decrease, demand decreases

CHANGES IN INCOME
As income increases, demand increases
 As income decreases, demand decreases

CHANGES IN TASTES
If something becomes a fad, demand increases
 If something loses popularity, demand
decreases

PRICE OF SUBSTITUTES
If the price of a substitute decreases, demand
for original product decreases
 If price of a substitute increases, demand
increases

PRICE OF COMPLEMENTARY GOODS
If the price of a complement increases,
demand decreases
 If the price of a complement decreases,
demand increases

CONSUMER EXPECTATIONS

Consumers will change
their buying behavior
based on what they think
will happen
 If
they think the price will go
up soon, they will buy more
now and demand will
increase
 If they think the price will
decrease soon, they will
wait until the price decrease
and demand will decrease
THE PRICE ELASTICITY OF DEMAND
Elasticity: concept dealing with
consumers’ responsiveness to an
increase or decrease in price
 Price elasticity of demand:
concept that deals with how much
demand varies according to a
change in price

ELASTIC DEMAND

Situation in which the rise or fall of a product’s
price greatly affects the quantity demanded
that consumers are willing to buy
INELASTIC DEMAND

Situation in which a product’s price change has
little affect on the quantity demanded
WHAT DETERMINES PRICE ELASTICITY

3 factors
 Existence
of substitutes
 Portion of budget spent on a item
 time to adjust