LECTURE 2a - DEMAND

ECON

OMIC

LECTURE 2a

DEMAND

STEVEN.REYNOLDS@CITYOFGLASGOWCOLLEGE.AC.UK

OVERVIEW

1. LAW OF DEMAND

4. LAW OF SUPPLY

TODAY'S LECTURE

2. THE DEMAND CURVE

5. THE SUPPLY CURVE

3.SHIFT IN DEMAND

6. SHIFT IN SUPPLY

HOWMUCH WOULD YOU PAY?

PUKKA NOTPAD - A5 200 PAGES

PS5

NAME 4 BEDROOM DETACHED HOUSE

IRN BRU

MARKET PRICE

MARKET PRICE

MARKET PRICE

MARKET PRICE

WHY STUDY CONSUMER DEMAND?

KEY REASONS

• ALLOWS US TO UNDERSTAND THE FACTORS WHICH INFLUENCE CONSUMER DEMAND

• ALLOWS US TO EXAMINE THE REASONS WHY CONSUMERS DEMAND MORE OR LESS OF A PARTICULAR GOOD OR SERVCE

WHO SETS THE PRICE OF A PRODUCT OR SERVICE?

DEMAND

WE LOOK AT DEMAND FROM THE CONSUMER PERSPECTIVE - TO SATISFY OUR WANTS

Market price is a reflection of consumers willingness to buy and each given price point

For market demand add up the quantities bought by all consumers at given market prices

THE LAW OF DEMAND

THE INCOME EFFECT

If the price of a good increases – people will feel poorer, they can not buy as much of a good with their money: the purchasing power of their income has fallen

THE SUBSTITUTION EFFECT

The good will now cost more relative to other goods. People will now switch to alternative or ‘substitute’ goods

EXAMPLE

DRAWING THE DEMAND CURVE

A local store decides to examine the demand for chocolate at different prices over a period of several months.

• DEMAND SCHEDULE

• DEMAND CURVE

DRAWING THE DEMAND

STUDY REFERENCE VIDEO

AS WE KNOW, PRICES RARELY REMAIN CONSTANT.

WHAT DO WE SUSPECT HAPPENS TO THE LINE?

CONTRACTION IN DEMAND

EXTENTION IN DEMAND

INFO

INFO

CETERIS PARIBUS

DEMAND VIDEO

PLEASE REVIEW

REASONS FOR CHANGE IN DEMAND

POPULATION & DEMOGRAPHICS

LAWS & REGULATIONS

SEASONAL FACTORS

ADVERTISING, BRANDING, MARKTETING

EXPECTATIONS

SUBSTITUTES

TRENDS / FASHION

INCOME

BASED ON THE ASSUMPTION THAT PRICE OF GOODS REMAIN UNCHANGED, OTHER FACTORS INFLUENCE DEMAND

COMPLIMENTARY GOODS

DRAWING THE DEMAND CURVE SHIFT

STEP 2

STEP 4

STEP 1

STEP 3

Draw your demand curve as normal and put in your first price and quantity

Decide if the factor affecting your demand is positive (shift to the right) or negative (shift to the left) Will this scenario result in more or less demand?

Add in your new demand curve and plot your new increased or decreased quantity demanded. Remember! Price stays the same!

Describe the changes What has happened to the demand line? Movement to the right or left? What has happened to price? What has happened to quantity demanded?

INCREASE

+INFO

DECREASE

HOMEWORK

PLEASE REVIEW

UPLOAD ANSWERS TO CANVAS "HOMEWORK FOLDER" BY MONDAY 25TH 11.59PM

DEMAND SHIFT VIDEO

OVERVIEW

LESSON RECAP

• Learned the meaning of demand.

• Examined what determines demand

• Learned how to draw demand curve movements

THANKS

STEVEN.REYNOLDS@CITYOFGLASGOWCOLLEGE.AC.UK

MHAIRI.MCMAHON@CITYOFGLASGOWCOLLEGE.AC.UK