4.1 What Is Demand?

Objectives
After studying this section, you will be able to: Describe and illustrate the concept of demand. Explain how demand and utility are related.

Applying Economic Concepts

Demand You express your demand for a product when you are willing and able to purchase it.

Introduction
Demand - desire to have or to own a certain product.

In a marketplace, it must go along with the ability and willingness to pay for it.

 Demand, like many other topics in Unit 2 is a microeconomic concept.

Microeconomics deals with behavior and decision making by small units.

Help explain how prices are determined and how individual economic decisions are made.
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 An individual demand curve shows the quantity that a person will demand varies depending on the price of a good or service.

Figure 4.1 The Demand for Compact Discs

Economists analyze demand by listing prices and desired quantities in a demand schedule (chart).

Figure 4.1 The Demand for Compact Discs

When the demand data is graphed, it forms a demand curve with a downward slope.

Discussion Question
Think about something you have been wanting to buy. What is its price? At what price would you be willing to buy the item?

The Law of Demand

The Law of Demand - quantity demanded of a good or service differs with its price.

When price goes up, the quantity demanded goes down; when price goes down, the quantity demanded goes up. $600
NoooOOO

$200
Yaaaayyyy
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The Law of Demand

A market demand curve illustrates how the quantity that all interested persons (the market) will demand varies depending on the Figure price of4.2 a good or service.
Individual and Market Demand Curves

Discussion Question
Why is price a consumers obstacle to buying?

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Demand and Marginal Utility

Marginal utility is the extra usefulness or satisfaction a person receives from getting or using one more unit of a product.

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Demand and Marginal Utility

Diminishing marginal utility - satisfaction we gain from buying a product lessens as we buy more of the same product.
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Discussion Question
You have heard about buying a cola as an example of diminishing marginal utility. What is another case in which more product gives less satisfaction?

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