Oh
heck
nah!
Nice!
Well,
I’llAt
getthose
10 prices,
I’m
only getting
3 bunches!
bunches.
No joke,
I love I
ain’t
no chump…chimp.
bananas.
What is Demand?
Bananas $1.50/bunch
Bananas $4.00/bunch
An Introduction to Demand
I. Demand: the desire, ability and
Like totally Sharon!
willingness to buy a product You should get the
scrunchie too. Todd
is going to go
bananas!
OMG! Like I am
totally going to buy
these penny loafers!
http://www.youtube.com/watch?v=_dIBL4tYQPI&no
Aren’t they like the
redirect=1
The Law of Demand
States that the quantity demanded (Q)of a
good/service and the price (P) of the good have
an inverse relationship
I. Law of Demand: When the price of a good (P)
increases the quantity demanded (Q) will
decrease and vice versa


As “P” goes
As “P” goes
“Q”
“Q”
That’s why I’m the King of
Burgers! Cheap prices means
lot’s of people wanting them!
Demand Schedule
A. Demand Schedule: is a listing that
shows the various quantities demanded of
a product at all prices in the market at a
Q = Quantity
P= Price
given time
demanded
Demand
Schedule
Representing the
demand of Pizza
Slices
1
$10
2
$8
3
$6
4
$4
5
$2
6
$1
Demand Curve
B. Demand Curve: graphical representation of a
demand schedule
Q = Quantity
demanded
1,10
P= Price
2,8
1
2
3
4
$10
$8
$6
$4
5
6
$2
$1
3,6
P
4,4
Q
So what causes movement along
the Curve?
II. Explaining Demand
A. Income Effect: When prices drop,
consumers pay less for a product and have
extra income to spend, leading to an
increase in consumption; and vice versa
 Ex. Tickets for A’s game drop from $15 to
$10; if you wanted to buy six tickets,
originally you would spend $90, but now it
costs $60, so you buy more and invite your
grandparents
B. The Substitution Effect: Tendency to
replace more costly items with less
expensive alternatives when available
leading to less quantity demanded of the
first good.

Ex You used to eat pizza 5 days a week, but
prices have increased on pizza so you only eat
pizza 2 day a week and PB&J 3 days.
You’ll all be
back … I mean
look at this
body!...I work
out.
Hey …wait a
second why
aren’t I in the
mix? Look at my
delicious
presentation
Oh no you didn’t!
As long as your
prices are high
people are going to
be savoring this
sexy body.
III. Limits of a Demand Curve
A.

Doesn’t take into account:
i.
Outside factors that maybe influence
buying habits
ii.
Individual buying habits
iii. Marginal Utility (see next point)
E.g. Let’s say a heat wave comes through
town. Now not as many people are buying
soup even if the price doesn’t change.
B. Marginal Utility and
Diminishing Marginal Utility
i.
ii.
iii.
Marginal utility refers to the degree of
usefulness/satisfaction a consumer gets when
using a product
As consumers continue to use the product the
amount of usefulness/satisfaction they feel
decreases
This is called diminishing marginal utility
IV. Change in Overall Demand vs. Quantity
Demanded
A.
B.
Quantity Demanded: Change in the quantity
demanded based on a change in PRICE of the
good itself that results in movement along the
curve
Overall demand: At every price point the
demand has changed based on an outside
factor other than the price of the good itself
that moves the demand graph to the left or to
the right
• Shift Left = Decrease in overall demand
• Shift Right = Increase in overall demand
Shift in Overall Demand vs.
Quantity Demanded
V. What Causes Shifts?
A. Income
i.Increase = more demand
ii.Decrease = less demand
B. Consumer Expectations
i. Expected future price affects
demand
a. Price increases in future = more
demand now
b. Sales in future = less demand
now
C. Population
i. Increasing pop = more
demand
• E.g. Food/Housing, Baby
boom
ii. Decreasing pop = less
demand
D. Consumer Tastes and
Advertising
i. Fads and Trends =
increase demand
temporarily, then
decrease
• Eg. Bellbottoms, Skinny
Jeans, hair perms
Man we could
sure use some
more toilet paper
up in here!
E. Prices of Related Goods
i. Complementary = Two goods
that are typically bought
together effect the demand of
the one another
• Eg. Skis and ski boots, hot
dogs and mustard
ii. Substitute = One products
demand is effected by
something that can easily be
used instead
• Eg. Snowboards and Skis