Unit 1: Demand

Shalom Akinwunmi
AP Economics
3rd Period
Demand: the quantities that people are willing and able to buy at various prices
  • Downward sloping
The Law of Demand: There is an inverse relationship between price and quantity demand
  • Change in quantity is determined by Δ in price
What Causes a Change in Quantity Demanded?

  • Δ in price
What Causes Change in Demand?
  • Δ
  • In buyer’s taste
  • In the number of buyers
  • In income (normal goods, inferior goods)
  • In price related goods (substitute goods, complementary goods)


Normal goods: goods that buyers buy more of when their income rises
Inferior goods: goods that buyers buy less of when their income rises
Substitute goods: goods that serve roughly the same purpose
  • Coke and Pepsi
  • Butter and margarine
Complementary goods: goods that are often consumed together
  • Burger and fries

 Elasticity of Demand: a measure of how consumers react to a change in price.
  • Elastic Demand: demand that is very sensitive to change in price.
  • Wants; many substitutes
  • Ex - fur coats, soda, steak. E > 1
  • Inelastic Demand: demand that is not very sensitive to a change in price.
  • Needs; few to no substitutes; ex - gas, milk, insulin. E < 1
  • Unit/Unitary Elastic: a perfect society/hypothetical situation.
  • E = 1
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Comments

  1. UnknownFebruary 4, 2018 at 11:06 AM

    I found your post to be both informative and organized, with your color coding and effective use of cartoons. However, I thought it to be a bit confusing to put 'fixed cost', 'variable cost', and 'marginal cost' under a post labeled 'Demand', for those definitions are more reminiscent of supply.

    ReplyDelete

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