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What is Demand?
To want or not to want? That is the question!
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Two Reasons
We call these the:
Income Effect and the Substitution Effect
INCOME EFFECT
Substitution Effect
Demand Schedule
A TABLE showing the amount that will be
purchased at various prices.
Price
Quantity
$1.00 10
$2.00
$3.00
Demand Curve
A GRAPH that shows the AMOUNT that will
be purchased at VARIOUS PRICES.
Price of
Ice-Cream
Cone
$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0
0 1
2 3 4 5 6 7 8 9 1
0
1
1
1
2
Quantity
of IceCream
Changes in QUANTITY
Demanded
A change in QUANTITY DEMANDED is
demonstrated by MOVEMENT ALONG a
demand curve caused by a CHANGE IN
PRICE Price
A
P
(P)
QD
1
P2
D1
0
0
Q1
Q2
A change in price.
one
IS DEMAND
Changes in DEMAND
A Change in Demand means:
Consumers purchase more or less products
at EVERY PRICE LEVEL causing a change
in the demand schedule and a shift of the
curve.
Price
(P)
P2
P1
D1
0
0
D2
D3
Changes in DEMAND
Demand changes when something other
than price changes the market conditions.
Non-price Determinants of Demand
Income of Consumers
Number of Buyers (population changes)
Expectations of Prices or Income in the Future
Prices of Related Goods
Tastes & Preferences of Consumers