2.

1 THE DEMAND CURVE

Learning Objectives
LO1 Explain the law of demand.
LO2 Interpret a demand schedule and a demand curve.
Key Terms

• demand • demand curve

• law of demand • quantity demanded
• marginal utility • individual demand
• law of diminishing marginal • market demand
utility
Demand

• Demand indicates how much of a product consumers are

both willing and able to buy at each price during a given
period, other things constant.
Law of Demand

• The law of demand says that quantity demanded varies

inversely with price, other things constant.
• The higher the price, the smaller the quantity demanded.
Law of Demand

• Demand, wants, and needs

• Substitution effect of a price change
• Income effect of a price change
money income- number of pesos you receive per period
real income- measured in terms of much it can buy
• Diminishing marginal utility
Demand Schedule
and Demand Curve
• Demand vs. quantity demanded
• Individual demand and market demand
Demand Schedule
and Demand Curve for Pizza
Figure 2.1
Market Demand for Pizza
Figure 2.2
SOLVE!

ASSUMPTION: There are just 3 consumers for burgers: Sheena,

Leo and Earl

At a price of P25, Sheena buys 4 burgers, Leo buys 3 burgers

and Earl buys 1 burger per week
At a price of P30; Sheena buys 3 burgers, Leo buys 2 burgers
and Earl buys none per week

Draw the individual demand of burger and the market demand

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© 2013 Cengage Learning. All Rights Reserved. CHAPTER 4
DEMAND FUNCTION- QD=600-200P

PRICE QUANTITY DEMANDED

0.5 500
1 400
1.5 300
2 200
2.5 100
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© 2013 Cengage Learning. All Rights Reserved. CHAPTER 4
SOLVE and DETERMINE!

1. a-intercept
2. b- inverse of slope
3. QD if the price is at 0.25
4. QD if the price is at 3

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© 2013 Cengage Learning. All Rights Reserved. CHAPTER 4
2.3 CHANGES IN DEMAND

Learning Objectives
LO1 Identify the determinants of demand, and explain how a
change in each affects the demand curve.
LO2 Distinguish between the money price and the time price of
a good.
Key Terms

• tastes
• movement along a demand curve
• shift of a demand curve
Changes That Can
Shift the Demand Curve
• Changes in consumer income
• Changes in the prices of related goods
• Changes in the size or composition of the population
• Changes in consumer expectations
• Changes in consumer tastes
An Increase in the Market Demand for Pizza

Figure 2.6
A Decrease in the Market Demand for Pizza

Figure 2.7
Movement Along a Demand Curve Versus a Shift
of the Curve
• A change in price, other things constant, causes a
movement along a demand curve, changing the quantity
demanded.
• A change in one of the determinants of demand other than
price causes a shift of a demand curve, changing demand.
Role of Time in Demand

• money price
• time price