Bellringer ON SLATES 1. Graph and correctly label this demand schedule Price Movie tickets Per night $15 1000 $12.50 2000 $10 4000 $7.50 7000 2. What economic concept is this graphic showing?
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Bellringer ON SLATES1. Graph and correctly label this demand
schedule
Price Movie ticketsPer night
$15 1000$12.50 2000$10 4000$7.50 7000
2. What economic concept is this graphic showing?
Using the law of demand, what would an economist predict about this
Review of Law of Demand• What happens in the
following situations?• The price of college
tuition increases?• The price of blue ray
DVD players decreases?
• The price of Eegees drinks increases?
• Effect on other goods/services?
DEMAND CHANGE VOCABULARY• “substitutes” – a good which can be substituted for another• “complements” – a good that is purchased with another
• Substitution Effect changes to the price of one good causes a buyer to buy more of the another good and vice versa. The buyer substitutes consumption of the second good for consumption of the first.
• Normal goods – goods you buy more of when your income increases
• Inferior goods – goods you buy less of when your income increases
• Income Effect – changes to a person’s income changes their demand
Why is this important for firms?
What sorts of goods are these?
Others?Compliments?Normal/Inferior?
Cultural?
• Preferences change• Spam in Hawaii• Sauerkraut at
Pueblo
Changes to demand
Does Demand change when the price of a good changes?
Only the Quantity demanded changes with price
Review:What is the Q*D at
Price = $1.50?
Show +/- framework
Quantity
$
Graphically speaking… Demand of movie tickets
D*
A RAISE!!!!
A Child!!!!
D after raise
Determinants of Demand
• Changes to income
Determinants of Demand• Availability and price of substitute goods
Determinants of Demand• Availability and price of compliments
Determinants of Demand• Changes to population
Determinants of Demand• Expectations of the Future PRICE
Future price forcasts
Tomato market:Analysts announce tomato prices will decrease in 2016
Electronics market:Its November 2
A trick to remember determinants of demand
• TRIBET = tastes of consumersR = Related goods (P$ change) I = Income of consumersB = # of consumersE = expectations of future
http://quizlet.com/2043838/individual-markets-flash-cards/
Quantity
$
Graphically speaking… Demand of movie tickets
D*
A RAISE!!!!
A Child!!!!
D after raise
A. The price of iPods falls
B. The price of music downloads falls
C. The price of CDs falls
A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11 Demand CurveDemand Curve
31
Draw a demand curve for music downloads. What happens to it in each of the following scenarios? Why?
A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11 A. Price of iPods fallsA. Price of iPods falls
32
Q2
Price of music down-loads
Quantity of music downloads
D1 D2
P1
Q1
Music downloads and iPods are complements.
A fall in price of iPods shifts the demand curve for music downloads to the right.
A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11 B. Price of music downloads fallsB. Price of music downloads falls
33
The D curve does not shift. Move down along curve to a point with lower P, higher Q.
Price of music down-loads
Quantity of music downloads
D1
P1
Q1 Q2
P2
A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11 C. Price of CDs fallsC. Price of CDs falls
34
P1
Q1
CDs and music downloads are substitutes.
A fall in price of CDs shifts demand for music downloads to the left.
Price of music down-loads
Quantity of music downloads
D1D2
Q2
TRIBE
Assignment
For each part of the:
Formulate two scenarios and graph For example:Beef marketConsumers see news story about mad cow diseaseDue start of class Friday, work on during class Thurs AFTER reading
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