DateDate: March 13, 2014: March 13, 2014

TopicTopic: The Law of Demand: The Law of Demand

AimAim: How does demand affect decision making?: How does demand affect decision making?

Do NowDo Now: Multiple Choice Questions. : Multiple Choice Questions.

Would you buy a slice of pizza for lunch if it cost:

What is demand?

The law states that all other factors being equal, as the price of a good or service increases, consumer

demand for the good or service will decrease.

Demand results from two patterns of behavior:

OR

• When a consumer reacts to the increase in price of one good by consuming less of that good, and more of a substitute good.

Demand results from two patterns of behavior:

•Buy fewer slices of pizza and do not substitute.•Consumption goes down.•That is the income effect!!!

•Price decrease, feel wealthier, consumption increases

•Based on the chart: How does an increase in the price of A affect consumption of other goods?

• A table that lists the quantity of a good that a person will purchase at each price in a market.

• Shows the quantities demanded at each price by all consumers in the market.

DEMAND CURVE• Representation of a demand schedule.

• Shows relationship between the price of the good and the quantity purchased.

• Slopes downward: Law of Demand.

Remember: As the price of a good/service increases, the quantity

purchased will decrease.

A Demand Schedule

Price ofDVD MOVIES

Number of DVD MOVIES

People Want to Buy

$5.00 18

$10.00 13

$15.00 10

$20.005

$25.00 0

TIME TO MAKE A MARKET DEMAND SCHEDULE.

How does How does demand affect demand affect

decision decision making?making?