Economics 92004 www.msu.edumilewsk6

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Economics 9/20/04 www.msu.edu/milewsk6

• OBJECTIVE Complete examination of economic
  systems and firms.
• I. Mindjogger Video Quiz
• II. Homework due Friday 9/24/04
• 1.) Chapter 2-3 Review
• 2.) Read Chapter 4 section 1 p.88-93
• -Answer questions (3-6) p.93
• 3.) Read Chapter 4 section 2 p.95-99
• -Answer questions (1,3-5) p.99
• III. Chapter 2-3 Review
• Reminders Chapter 2-3 Test Tomorrow
• Notebooks due Tomorrow

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Economics 9/21/04 www.msu.edu/milewsk6

• OBJECTIVE Demonstrate mastery of economic
  systems and business organizations.
• I. Journals (1-15) due
• II. Chapter 2-3 Test
• III. Homework due Friday 9/24/04
• 1.) Chapter 2-3 Review
• 2.) Read Chapter 4 section 1 p.88-93
• -Answer questions (3-6) p.93
• 3.) Read Chapter 4 section 2 p.95-99
• -Answer questions (1,3-5) p.99

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Economics 9/22/04 www.msu.edu/milewsk6

• OBJECTIVE Begin examination of what is demand.
• I. Journals 16 pt. A
• -Read Profiles in Economics p.94
• -Answer question 1 p.94
• II. Journal 16 pt. B
• -notes on demand
• III. Reminder of homework due Friday 9/24/04
• 1.) Chapter 2-3 Review
• 2.) Read Chapter 4 section 1 p.88-93
• -Answer questions (3-6) p.93
• 3.) Read Chapter 4 section 2 p.95-99
• -Answer questions (1,3-5) p.99

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What is demand?

• Demand the desire, ability, and willingness to
  buy a product.
• 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.

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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.

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Demand Curve

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

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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

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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

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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.

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Example 1

• How much satisfaction would you get from this?

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Example 1

• How much satisfaction would you get from this?

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Example 1

• How much satisfaction would you get from this?

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Example 2
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Example 2
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Example 2
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Economics 9/23/04www.msu.edu/milewsk6

• OBJECTIVE Examine changes in demand.
• I. Journal 17 pt. A
• -Read the Business Week Newsclip from my 21st
  Birthday on p.100
• -Answer questions (1-3) p.100
• II. Journal 17 pt. B
• -notes on demand

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Demand Changes

• Change in quantity demanded movement along the
  demand curve
• Change in demand shift in the demand curve

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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

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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
  your income stays the same, you can buy more. It
  has a similar effect of a pay raise if prices
  remain the same.

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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 .99 value menu.

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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

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• 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.

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Economics 9/24/04 www.msu.edu/milewsk6

• OBJECTIVE Begin examination of elasticity of
  demand.
• I. Journal 18 pt. A
• -Look at the graph on p.xvii
• -answer the four questions at the bottom of p.
  xvii
• II. Journal 18 pt. B
• -notes on elasticity of demand
• III. Journal 18 pt. C
• -WSJ Classroom Edition 12/99 (video)
• -Calling All Techies

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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

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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)

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Inelastic Demand

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

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Unit Elastic Demand

• Any change in price causes a proportional change
  in quantity demanded.
• Slope equals -1

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WSJ Classroom Edition

• 1.) What is biometrics?
• 2.) Why was there a big demand for people with
  technical skills?
• 3.) Why did Glasgow, KY think they were all that
  in 1999?