Supply

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Supply Demand Analysis

• Ms. Stack
• Fall 2008
• Economics

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• DEMAND
• Assignment 1

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Warm-up

• List 5 things that you have demanded in the
  past month what do I mean by demand?
• Why do you demand (choose) one good over another
  what are the factors/determinants in why you
  buy something?
• List 5 things you would demand if scarcity did
  not exist.

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What is Demand?

• A willingness to buy a product at a certain price
• Demand is from the perspective of the buyer
• What are some examples of goods you demand as a
  consumer?

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Miss Stacks Demand List

• Would you prefer brand name or generic products?

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Law of Demand

• People will buy more of a product at a lower
  price than a higher price
• Why do you think this holds true?

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Demand Schedule
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Demand Schedule

• A list of quantity of a product that people are
  wiling to buy at each price
• At which price are consumers willing to buy the
  LEAST pizzas? The MOST?
• ONLY PRICES WILL CHANGE QUANTITY DEMANDED

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Quantity Demanded

• A movement along the Demand Curve that DOES NOT
  result in a shift a shift results ONLY when one
  of the Determinants of Demand is affected
• A price change simply moves you to a new point on
  the SAME curve
• Demand Schedule Example

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Demand Schedule
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A Shift/Change in Demand

• A change in demand is determined by a factor in
  the Determinants of Demand
• The curve will either shift to the left
  (decrease) or right (increase)

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Determinants of Demand

• Consumer Tastes and Preferences
• Potential Customers
• Money Income of Consumers
• Substitute Goods
• Complementary Goods
• Price Expectations

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Tastes Preferences

• People have different tastes preferences
• Food, Music, Clothes, etc
• Advertising, Fashion, Fads also influence your
  tastes and preferences for a good

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Potential Customers

• A large number of consumers can produce a greater
  demand for the good

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Income of Consumers

• If income increases, consumers will demand
  normal goods instead of inferior goods.
• Normal goodsluxury goods brand names (i.e.
  Guess?, Levis, The Gap, Nordstroms)
• Inferior goodsnon-brand name goods (i.e. 99
  cent store, Target, Outdoor Flea Markets)

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Substitute Goods

• If the price of one good increases, the consumer
  will buy the alternative (or substitute) good,
  instead.
• This usually happens with similar products.
• If the price of a can of Coca-Cola increases to
  2.00 while a can of Pepsi is 1.00 (and if you
  are indifferent between both), which one would
  you choose?

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Complementary Goods

• Some goods go together. They will complement
  one another.
• If the price of one complement good increases,
  the other good will also increase (vice versa).
• Examples
• --Cereal Milk --Cookies Milk
• --Peanut Butter Jelly

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Price Expectations

• If people expect that prices of a good will
  increase, it will (and vice versa).
• This will result in a change in demand and shift
  the demand curve.

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Demand Curve

• A downward sloping line
• The demand curve illustrates an positive
  relationship between price quantity

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Supply and Demand Graph
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Demand Curve (Right Shift)

• Increases in Demand Curve will shift to the right

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Demand Curve(Leftward Shift)
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Demand Wrap-Up

• When we study Demand we are looking at whose
  perspective?
• What is the difference between Quantity
  Demanded and Change in Demand?
• What are the Determinants of Demand?
• Define substitute goods and give an example.
• Define complementary goods and give an example.
• Draw a Demand Supply Graph-show Prices,
  Quantity, Equilibrium

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BLOOD DIAMOND Clip Questions

• Why did the world leaders meet in Belgium at the
  G8 Conference?
• Aside from diamonds, what other natural resources
  in Africa was exploited in the past?
• What is the profit from conflict (or rough)
  diamonds used for?
• Of the worlds total supply of diamonds, how much
  is the US responsible for purchasing?
• How much money is made in the diamond industry?
• What percentage of conflict diamonds account for
  the industry?