Year 8 Economics - Demand

Demand

Key Term: Demand

• Demand is defined as the willingness and ability of consumers to purchase a good or service at a given price level.

Price, Ability, and Willingness

• Scenario 1:

  • Price of a Mustang is too high.

  • The consumer lacks the ability to afford it.

  • Result: The consumer chooses another car (substitute).

• Scenario 2:

  • The consumer can afford the Mustang.

  • The consumer is willing to choose the Mustang over other options (e.g., a 4-cylinder car).

The Law of Demand

• Key Term: Law of Demand states that the price and quantity demanded of any good or service are inversely related.

  • When the price of a product increases, the quantity demanded for that product will fall.

  • Inversely: Changing in an opposite direction in relation to something else.

Price and Quantity Demanded Relationship

• The amount of a good that buyers purchase at a higher price is less.

• As the price of a good increases, so does the opportunity cost of buying that good.

• People naturally avoid buying a product that forces them to forgo something else they value more.

• Example:

  • Shoes: Old Price = $50$, New Price = $50$

  • Tennis Racquet: Old Price = $100$, New Price = $150$

  • Extension: Opportunity Cost

Multiple Choice Questions - Demand vs. Wants

• Question 1: Demands differ from wants in that:

  • Demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.

• Definitions:

  • Demand: Willingness and ability of consumers to purchase a good or service at a given price level.

  • Want: Things we desire but are not essential for survival.

  • Extension

Multiple Choice Questions - Law of Demand

• Question 2: The law of demand states that, other things remaining the same, the higher the price of a good, the:

  • smaller is the quantity of the good demanded.

• Question 3: The law of demand states that the quantity of a good demanded varies:

  • inversely with its price.

• Question 4: Which of the following is consistent with the law of demand?

  • An increase in the price of a coke causes a decrease in the quantity of coke demanded.

• Question 5: The law of demand implies that if nothing else changes, there is:

  • a negative relationship (inverse) between the price of a good and the quantity demanded.

Demand Curve

• Key Term: Demand Curve is a graph that shows the relationship between the price of a good or service and the quantity demanded for a given period of time.

Law of Demand and Demand Curve Demonstration

• The law of demand states that quantity demanded and price are inversely related (as one goes up, the other goes down).

• This can be seen on a demand curve.

• When the price decreases from $p1$ to $p2$, there is an increase in quantity demanded from $Q1$ to $Q2$.

• This affirms the inverse relationship between price and quantity demanded. Extension

Demand Schedule

*Key Term: Demand Schedule

*What is the willingness and ability of consumers to purchase chocolate bars when the price is $2.00$?

*What pattern is observable between quantity and price?

Key Terms Recap

• Demand

• Demand Curve

• Law of Demand