Period

UNIT 3: "Just the Basics" of Demand, Supply and Prices

Date In Class Homework Vocab Friday, Introduction Activity Read pp. 79 - 84 in book YOU DO NOT HAVE TO March 6 A MARKET IN WHEAT DEFINE VOCAB TERMS

SEPARATELY. THEY ARE INCLUDED IN THE CLASS NOTES.

Monday, PACKET PAGES 1-2 PACKET PAGE 3 Demand, Law of Demand, March 9 Quantity Demanded,

Notes ­ Law of Demand Law of Demand worksheet Substitution Effect, Income In Class Demonstration ­ Law of Effect, Demand Schedule, Demand for Soda Market Demand Schedule,

Demand Curve Tuesday, March 10

PACKET PAGES 4-5

Notes - Difference between change in quantity demanded and shift in demand curve 5 Determinants of Demand

PACKET PAGES 6-8

HW: "Demand and Its Functions" and "Ted's Tape Production Company" wkshts.

Read pp. 85 - 88 in book

Ceteris paribus, Normal Goods, Inferior Goods, 5 Determinants of Demand

Wednesday, PACKET PAGES 9-11 PACKET PAGES 12-13 Elasticity of Demand, March 11 Inelastic, Elastic

Notes - Elasticity of Demand- HW: "Primary Factors that What is it? Why should we care? Determine Elasticity of What does it look like on a Demand" ad "Elasticity of graph? 3 tests. Real life goods. Demand" wkshts Ch'* ""tl1

Read pp. 90 - 96 in book ,e,Au'f"~lItt f-r £:tfr«.~'" *

Thursday, March 12 HALF DAY

PACKET PAGES 14-15 DEMAND PRACTICE

Friday, DEMAND TEST THERE WILL BE NO March 13 WILL BE SIMILAR TO THE

PRACTICE WORKSHEET FROM CLASS THURSDAY.

"BINDER CHECKS" FOR UNIT 3. INSTEAD, YOU WILL HAVE A QUIZ AT THE END OF EACH SECTION.

Name _At~rs--",-,-"B=-.;()=-=CJ..:...!-'fJ=-=ie_J_C_~_as._s---=N_o li_e_,S _ Period _

Unit 3 Notes DEMAND Monday, March 9 *sJopes dOVfTlwa,J and fo t4

Explain the law of demand. Draw a typical demand curve. Pdp hqhtf)ur;and: the deSire" 10 own somtthin9 and the, a};J1ty to F'I {r;rit INY~Rs£"

Lawof Del11(JnrJ:: As prrces go t1'p/ D~mand goes down /Is PriUS 90 Down~ Dtmand 1,es up uanh'

What are the substitution effect and the income effect? How do these two effects influence con~mer decisions?

substitution effect = Consumers rea cf to ~ price, incrtaJe, by tonsumi'!j less of tt good and bUji'!J J'(Jmefl)l~ else.

income effect = as priu.s. increise/ Wt {tel fotJrer The t.fkcl/~ the ~t, In CPnruMfl!r.h1ItSU/1r17j ~ fA.,

Below is the demand schedule for an individual and mm:ke. cha"f(, In !Ji::Ilnt~, (alp/sled ~

chlJ'1u',n tn-a). one rrson

\\ Cderf.s ~ri ~(lJ If

~t/ other thlnJ-s held Cfnsm:.:.:-n~__

J)erna;f Curv{ is

all conJumt~ in fhtt! ma fA alA. rtLk.­Graph the mar et demand curve and label it 0 I.

Qs lOrlj as

ffLL ~n /1 thin1 tha.t Ghafl1e.s

IS prr(e,.,

fri~ ~.sO

per J.oo $/irk

ISO

1,00

50 too I~ NJ 3!J) .Jt()

()IJ.Qrrfr~ # slrce:s

--- ---

In Class Demonstration - Law of Demand for Soda

Mrs. Boonie has 2 goods. One and one _

How many students are willing and able to purchase the for ?

Create a demand schedule and graph the demand curves.

Qp Oz.

.50

.75

1.00

1.25

1.50

1.75

2.00

P ),00

/,7!)

),50

/,2S'

},OO

.7~

.SO

.1~

Answers w;11 VII;"'! /

dqelldinj C11 ~

sftt£U1J1r in class,

Q 2

Homework: Law of Demand Work Sheet

1.

P

1 2 4 6 8 10 12

2.

P t 15 11 7 4 3 1

Dominos Pizza is doing market research to determine how many pizzas would sell in the Danville area. They send representatives door-to-door to ask how many pizzas they would be willing to buy at different prices. The results of the survey reveal that at $2 for a medium pizza, consumers would buy 2000 pizzas. At $4, they would buy 1600. At $6, they would buy 1200. At $8, they would buy 800. At $10, they would buy 400. schedule and graph the demand for pizzas.

Q p;2W' II

20ao Ib I ~OO

IlOO Price '/

800 4 b "100

~ ;00

f z

At $12, they would buy 200. Complete the demand

•

.. . SOD' /0 0 /Soa 2'()oo

(1uaniJ- (-#f"ZUtSMrs. Boonie bought some Girl Scout cookies and has one ox 0 Thin ints on her desk. Matt Derr comes into the classroom and asks her for the cookies. Mrs. Boonie asks Matt how much he's willing to pay for them. lIe says $1. Suddenly, 12 students (including Matt) are willing to buy them for $1. Seeing a lot of consumer interest, Mrs. Boonie raises the price to $3. 10 students are still interested in buying the cookies. She raises the price to $4. Now 8 students want to buy them. At $7, 5 students want to buy the cookies. At $11,2 students are still interested in buying the cookies. Finally, Mrs. Boonie asks for $15, and 1 student - Matt Den - is willing to pay $15 for the box of cookies. Complete the demand schedule and graph the demand for Girl Scout cookies.

/5 Q bOXtSof

/oes tf /3

I CO"~ II ,Jdl 10

l.

S- ~fU- 7 B

/0 f~ Il .3

z.. S- a 10 /2..

Q (bOJe£ of (lJoKieS)

3

Unit 3 Notes DEMAND Tuesday, March 10

anlfu'n other than prite.- fhat afk.ds tonslAmer.s' yrf'J/ftlfness +0 b/).~ t< pndtu.,:r List the five determ'nants or demand and that can cause a shift in the Mmand curve. 0

1 fo h" " /' n()rtnal goo~ - as ;n((J/'Y2£ In CTl.fJJ(S/ ~ buy (1IQrt., (Wi; j evn tS.; 1phon 1'-0 . V r,tnql.- In Inl4me,....... G )

....... inferior qoods - as in(Qf{/£ IncfUJ.It$ wt- bu.!A IlLS seneric.. lertttl.l 2. Ex.pccJo:frons of -(uwre. prIUS . "1 U.ftd CQr!

3. Popultl-hm Gha01l.S

4. C4nsumer trJsb and ad'(u+w~ J Ii ds 2 dtm.r bolA At .2­5. ~el(lkd goods become- mm. or less apenswe,( camp Imtn ary JM ~ lAsed 101elAtr

SlAh.r1rtuJe. goods:qoods UJtd. Tn pIAU- of Wh Qrntr

f

Change in p~ce only Change in quantity demanded

I, Cet(rfJ fXJribu.s If ())) pt-her th,,,s neld constant

d h etween a c curve,U dn erstan t e d'nI erence b hange In quantIty demand d e and ash'f'I tinthe demand

Increase in demand

IncrtO.!e- Rf~ hi

Decrease in demand

j)u~4Je Llf't

a. hot dogs.

b. the playoffs and go Super Bowl.

merchandise?

to the

c. has the largest numstudents in recent history.

ber of

d. People deciding conserve gasoline a

greater rates.

to re

Result of this Which demand curve? change:

(";,.,,1,,, one)

More hot d.::' ,demanded (Change In quantity demanded OJ]

or or Less hot dogs Change in demand D2

demanded The New York Giants win

( More Giants st.:9 What happens demanded Change in quantity demanded 0,

to the demand on NY Giants or or Less Giants stuff ~Change in demand OJ) demanded

The junior class at OHS (rrYlore textboy demanded Change in quantity demanded O[ or or Less textbooks ( "Change in demand OJ) demanded More gasoline demanded Change in quantity demanded 0 1

purchasing hybrid vehicles at or or

("less gaSOlin~ ~hange in demand~ demanded -

Giant announces a sale on

T prj c.eo

Why D) or D 2?

p-rrc.~ 0 n!J

Ofh,r than fdee

c~nsU('(l.l,-r fults t{n.d adverlr,s,

Other HiMI fn'r.t,.

fOP/A,J6.~

otkr than fn~

CfnSurn..t-r fRsles

"J -

..

4

Unit 3 Notes DEMAND Tuesday, March 10

CD Explain how the change in the price of one good can affect demand for r lated good.

Complementary good = 2 Jood$ fhar are- 6~ufhf l- wuJ 'fdtt#Jtr

S;"is pm' sti boots

Substitute good = foods un' JI/ ;;!tlU of ellch ~fhtr CQ/f.e., &r f(psi

JU9ar- or arh/fcfai SWtt.ftn~("'

CD ChQnljf- in@come..f'/ormtl.lgoods=aslnl4rnein<:rtOses, wt. bu~ more. (.WI'9 om,,) How does an inferior good violate the law of demand? I phtJnts

We buy {erVt[ In{tri~r gooels wAen we- htlV~ tnlrf./ moner - used tars - jtnen'C- Ctrut-!

- j(aame.n no()dLu R. hI! do!s

o ~lo1ffiYl chanqe.s

)!lort plOp Ie.. f fla.k Jncrtased dunand Ex. YlV'f.IT .soldiers C()'frlIr1j baot.- frm WA(' Crr.a:ft.d iN- fl ba h!j boom II

hl9her tlttMand .pr bCiby cloffles/ fo(JrA, new sthools/ \;1nlarsdu s /' rtnrr"fn,/nf / .sr1(ipJ Secun"tr;

® Cons\lt.rntr(j)str~1 freftytnas 2- Aollferffs(nq

Czoa/ of CU).'1erlisinj = i nCYfa,ft d.JJn~"d {w- 900 ds fA eyse 1/ Clever ods., sOClar +rends I tv sh"rrs (af] creak "fadr I,

CD @.pecw.trvru 6£ Fuwre- pnc!.S

txptcto.'fm1 of hi1her p-ri(e~ ~ fhlrt{)''sul dun&4.nd ~ -sfort.. Will rCliJe fX!ClS h.U+ week... - 'yV().r fn Jr1rdttU-- [ast stbPS gil prodwc:lrvn

£~pechrtTW1 of lower priUS::: decreaSfd rh-m()JI,l N4W "- sa luptr5m .so. ys fttm U 9o,nJ on S()./e.. ru.x+ fY1mrh 5

Homework: Demand and Its Functions

Using the demand schedule. graph the following information.

If the price of root beer was John would buy this amount per month .10 25 .20 20 .30 15 .40 10 .50 P 5

.70

.60

.50

.40

.30

.20

.10

L---------------~9

5 10 15 20 25 30 35

Label your curve 0 1

1. WhClt do you notice about the demand curve? If s/opu down ward {YrrfI L fu R­

2. According to the demand schedule, how many CaDS of rcot beer will John buy at .30 a can? at .50? IS 5

3. What does the relationship of prices and quantity demanded make up? J I /)lItItlniJdudul.f,~ demanp( lfArvt,

4. Define demand schedule. fable fhaf luts UQntr'7 dtmarrhJ af tach pnt.e,

5. Define quantity deman ed. I OtrlllAnt tl pUSOI? IS Willi'!} and able, Iu bUj Ilf a.. Ct,,!ain prtCf..;

6. Summarize the difference between demand and guantity demanded. tjua;/,lrfw def'l1~l1dML)! ~pefl 1Ir On /fflet" I

7. What d4Jes inv~rse relation mean? whtn QIU, (lQtS lAp.! tAt, aflu,. ,~u down

8. What is the law of demand?

As frrces '/ 1uan~·ht demdndtJ t CPt) QDt)

As pnus J.) r'-UIfl1i~ dunandd t ( PJ ) 00 1)

6

-------------Name Per Homework: Ted's Tape Production Company (part 1)

Let's see how the factors on demand operate in the market place. Below are demand schedules for a three-month period for Ted's Tape Production Company:

In Month D 1 there was a demand for Ted's tapes as indicated in the schedule, D1• In Month D2 there was

a decrease in price of the standard tape player and this resulted in the demand schedule 0 2 . In Month 0 3

the compact disc which gives excellent reproduction was being sold at a price consumers could afford for the fIrst time. This resulted in the demand schedule 0 3

.

PRICE

$10 100 200 50

100

200

200

300

400

500

550

600

625

$9 200 300

$8 400 475

$7 500 550

$6 550 600

$5 600 650

$4 650 700

$3 700 800

$2 725 850

$1 750 900

/t'1onth A(D1

)

(I t \ (OYYlP erntn :.,)

~ pn'te, ttl lpe.. PIAN1tfJ CDDI~..,!r.5 wrnt

,MmthB(D2)

# Tapes Quantity Demanded ubs-htV1h)10Yl !a J-e. (s I

MMthC(DJ)

In graphic form the data from the demand schedule would look like this:

p

$10

$9

$8

$7

$6

$5

$4

$3

$2

$1

Q

o 100 200 300 400 500 600 700 800 900

7

PerName _ Homework: Ted's Tape Production Company (part 2)

Using the information given regarding Ted's Tape Production Company answer the following questions. (Hint-Remember the five factors that can cause a change in demand.)

1. What factor caused the change in demand from curve D 1 to curve D2?

Cornpllrntnta~ good wenr on sale.J' lncreaS{'!.J tfu..- demand f,r- tapes,

feoplt b(}U9hf.MlJrt, -hpe plQ.<Jer:! t- nfldtd. mpr-e, #pts,

2. What factor caused the change in demand from curve 0 2 to curve D3?

For the next two questions just consider the €tiOnSh~etweenthe three demand curves,

3. What other factors could account for a shift from curve Dl to curve D2? Explain.

Could. be. on1. of tht otttt-r defcrminCtnfs of dtma.ndJ ~

l. 1Y1lOmt.. ch(,ln~ t LIncrmtt-1' - normtttl 9ood) 2. C(JY1sum.t-r fask! 3, [XptCht'iTVfI of fcJ.Jvre, prileS (expte-t prru~ +0 t) ~, Popl,A.,lo:frOY\ !ncrtase..­

4. What other factors could account for a shift from curve 0 2 to curve 03? Explain,

LOlAld be 0."1 of the. orkr defcrrrJltlttnn of ~CUI.J ~

I, !neumt- Gha(l~e ( In(~ j,) ~ now th4t Cl> pl(~t r.> OK. ~ I f-pes are- an r'n (eriff jood

Z. consu,mtr tasTes prt fer her{ ite-n, 3, rlptctQhrtYl of futvre- ri US Ctr-pte-+ priUS ~ .J,) ~, Populcl'lrm u{ecrtllJf/

8

----------Name Per

Unit 3 Notes DEMAND Wednesday, March 11

What does elasticity of demand measure?

- f~t, c,hanJe, of p- iuanil~ d~mant/uL, reJanYe h ~ Chflnfe. in prt'U,

- tht- t'tSpt/tL!,ventS"S of a luflnfrn; dt-mandeL ~ t1- pr/u cha~~

(;cneral .IhP.fl$ ~

• f 30430

P P JO ;lO

10 /0

1 3 ~ Q

Tntlastic. £1 Qsfre.­

- rl'jf4 - flexible­- Y0IJ... d,n't cha~t. b.... ~,~ h bih prIce. is s-frunJly linK.td W blAJ'YIJ paifcms

b~c.a 1JSt. of pne.t.­ - If pr-rces qo d'l({()/ ~Ol) Ire j()i'!J -10 bjyou 'llO.ve, to" bUj a Certain 0.. fot,arno().nt ftja/tileu of t riU , --­

Who cares if something is elastic or not?

A. Frr(n,f // Bus/ne.cres

How MlAc..h (jJr') va" r'&tIH.. Hu.. p";u" be-.pn,. ~t. b~(n -/0 Jose ftV('I1~ e. ?

~ 10 Q

430

20 J,

jc> :>

(noney brouqhf- rf\

(P.tlftfltA.e..:: P)(. ~) /2.1);t. 2. ~ 170

~/O)(!):SO

I 1. .3 .. 5" " 7 • '1 10 oj 5')4. fa: 5"0

B.

What prodw.c:h CQfl bL faud l h1 hOW much? ([x. d~5) How I'Yllltch will taxes cflanJl­() per..rm

1

! beha.\fTtrr~

(}O'ftrn ment

booz.e, / gas)

9

----------Name Per

Unit 3 Notes DEMAND Wednesday, March 11 Shapes of Elasticity of Demand Curves:

Relatively Inelastic fw.. p' ~ p

Whether fn-ce- totS 1 (fr ~ pup Ie, bu:J hur-/1 tN.S~ amt,

£x. i~ C,~S~ bur,) t'~ r:frrcJ~ I coffee.

Q

Perfectly Inelastic = Vtrica1.. lUte-

People, b~ f1v., S~ amt.p Priu.. is hO {acfrJr" you. had ft­

~"'. Insulin I \,-fe, .sQv;n~ f.nscnp1rfn drvt~.s.l 1) salt/ Matthes, fo'1Jfhplc-ts

ft\&l ,.t,t.,t priCt-f--------­

Relatively Elastic II ~fretch~c/ olA-r II

''Lt)Nr:J CroocLs fhifl9S yo~ don If nb-d. W(/~~.II

fx. tylovie~/ fY1/J.nc..1 vac.a~ ai'r/l~ frc}.b1:s rtsfat.tranf mealS j

Perfectly Elastic -= ~Orll/YlW It'ne-

You caY) Stil cd I you ""ant ()vf mof'tt,f F.riU­- DUl't ratn -Htt. priCJ,,,I or people r-ril! b/).j eJ.u.wht~.

- ~I\ It- lower you-'r priU.J (J'r Y0l). 'tt.- IosfhJ tttVtn~.

Ex. hfqhly campt.tifrv!.. 9o()ris farm co YrlMldnrt.s - whe~+1 cory)" rni Ii(

Unitary Elastic ~ >pecfaJ case.~

/. ch()rtfje. }n priu, ~ /. cnanq.e. I'll 1uaYt:hlj dur~ndJ

Ii yOI;t qet whaJ 'lOlA fQAj {or. II

-nt-e.$

- Pnvo:k se-hoo/ fUffrQYV 10

----------Name Per

Unit 3 Notes DEMAND Wednesday, March 11 3 Tests to Determine Elasticity: SJ~pe i~ I'JOT f-Xad'J fhe S~f1U.-, -(h{nq as elashl-I;

you. cannot de/crmine. eJa.snu fu 5'1 mp'tJ b~ e,jtbrJJ fItR.­1. Common sense test - 4 questions d ae.-lY'lafl CU~.

a. h it a h~ass/~? b. /Ire. thert, ton 5ubs!ifuks? c. po you need d now? d. Does if tak£- a 5rnall forlTinv of JrMr incornL ~

The more you answer" VIS "to these 4 questions, the more likely it is to be IN£Ll1 SII c. I

2. The efficiency coefficient (p. 93)

per: "d NI'l?: IfI ! UA£losiici0 = (E) fua tJ,. cr r /r

£ > I Dostie

£: L I Ine/ashe­

£=0 fer{cctl'j Indosfre­

f: -;. <>e' Perfte:Il'l £1(J rnc..

[-=/ Umtar::; llns17c­

3. The revenue test

f(tvenu(" ~ P. 1(. Q,

YOu. wanf +0 Nt xfmrze. trv( u..e.­(~ 'hd:.tn Tn)

£/ame, lJtmand P-!- Rt'ltt\lAA. t Pt P.MfI ~

J

11

-------------PerName

Homework: Primary Factors that Determine Elasticity of Demand

The following are primary factors that determine price elasticity of demand.

• Availability of substitutes-If there are many, response is elastic. • Importance to a consumer's budget-If an item does not cost very much and has little effect

on budget, response is inelastic. • Necessity or luxury-If an item is necessary. response is inelastic; if it is a lUXUry, response

is elastic. • The time it takes to develop substitutes-Remember that over the long run the demand for

most items is elastic.

1. The elasticity of demand for the following items has been determined. Explain why in terms of the primary factors

Why?Elastic /InelasticItem

Elastica. Big Mac lH_tlV .f1A6,,.., Its t "J r;

b. Salt Inelastic

c. Pizza Elastic

J

(~

d. Tickets for Inelastic '.Sa popular

rock con­cert I Ii "

f(i tr

e. Brain sur­ Inelastic gery

12

------------

0

PerName Homework: Elasticity of Demand

p

$1.25l p o r $1.00 i

$.75c e

$.50

$.25

'----5.L-----...l.- --Q0 100

Units of Output An Elastic Demand Curve

p Graph C whttPt

p r i c e

----------0

a l.----~50=-------l.---Q

100

Units of Output Infinitely Elastic Demand

p Graph B Sa It

p r i c e

o o

'-------=5~0-------l.---Q100

Units of Output Perfectly Inelastic Demand

p Graph 0 Oil

$10 p r 8 i c 6 e

4

2

0

0

Q 50 100

Units of Output An Inelastic Demand Curve

13

-------------Name

PRACTICE Use the graph below to answer questions #1-3.

Price Demand 'Of wool Socks

$2

$1

o OtJ.':lntfty

l 1. How many pairs of socks would be sold at a price of $4?

/{19 At 2. If there were a cold spell, would the lemand curve for socks move to the left or to the right?

3. Explain how the la\\ of demand is demonstrated by the graph.

A.s P1'J QD -J,. As PJ~ /)tJwnwl. ~~ frrm L h

A. The higher the price of pizza,4. income the fewer slices people will buy iseffect an example of the __.

R Buying fewer slices of pizza5 . law ofA when rising prices reduce real demand income is an example of the _.

C. Eating salad or tacos instead of/) 6. demand pizza when the price of pizza goes schedule up is an example of the _.

7. subs titution D. A is a table that lists the effect quantity demanded for each price.

, ~

i\, 1-­

1\ -

.­

~ 1I j'....,I '" I r

2 4 6 8 10

Per

£ 8. ceteris . two goods that are bought paribus and used together

() 9. inf erior goods B. related goods that are used in place of each other

C 10. nonnal ~ goods

C. goods that consumers buy more of when income Increases

8 J 1. subs titutes D. goods that consumers buy less of when income increases

A 12. ~ complements

E. nothing but the price of an item will change, all other factors are held constant

F 13. det enninants ~ of demand

F. anything, other than price, that will affect customers' willingness to buy a product

(# 14- 18) Five Determinants of Demand

A. An innux of immigrants moves inlo the area, creating an increased demand for ant 14. inc ome international food section at the supermarket.

B. If two goods are used 15. together, an increased demand expectation of for one will increase demand for future prices the other.

C. The more money a student A earns, the more sports equipment .a..... 16. popu lation

he will buy.

D. Jessica Simpson appears in a /) 17. ta stes and commercial to sell Proactiv®. -- advertising Demand among teenagers

Increases.

E. Jmmediate demand for a good ~ 1 8. related

goes down if consumers believe goods it will '"go on sale" in the future.

14

For items #19 - 21, use the three graphs below:

Graph A Graph B Graph C

Left shift of a curveChange along a curve

IgS1.5Oi·········· ,

I .gl~· ,~Original..- I .

n. - emand n.0: S1.GtH- : . II

:•

j : New ­I ; ~~and L Demand ,-_Dern?nd__._._... Quantity Quantity

-----A- 19. Which graph(s) show(s) a change in quantity demanded?

Bit 20. Which graph(s) show(s) a change in demand?

i,c 21. Which graph(s) show(s) a change in factors other than price?

~ 22. Which graph(s) show(s) a change in price only?

Ii 23. A computer manufacturer lowe' What does a graph of the change in quantity demanded for computers look like?

Explain. fnu InJ,

C 24. A volleyball manufacturer convinces high schools to fund varsity volleybaJI teams. What does a graph of change in demand for voJIe baJIs look like?

Explain. ~/dul- tdJ'YIpleHlenf.s

t 25. A freeze ruins the orange crop, and orange juice prices rise. What does a graph of change in demand for ~juice look like? -

RighI shift of a ~urve

~ew- Demand

Original ­

----~

B 26. Advertising campaigns and a new hit movie make baggy pants look very unattractive and unpopular. What does a graph of change in demand for baggy pants look like?

Explain.

C 27. Oreo cookies go on sale. What does a graph of change in demand for milk look like?

Explain.

15