Chapter 4 Summary
Demand
Victoria Patterson
Eric Grove
Mr. Treadway |Period 3
Eric Grove
Mr. Treadway |Period 3
Overview
This chapter focuses on the concept of demand in economics. Demand is the willingness and ability to buy a product at a certain price. The use and ability to produce demand schedules and curves is also explored, as well as the factors that shift the demand curves. Elasticity is introduced, giving an insight on the relationship between the price and quantity demanded of a good.
In order to get a connection with demand in our own world, the class was asked to come up with a good and different prices for the good. Then, the class needed to survey people and ask how much of the good would be bought at the specified prices. This activity showed the effects of price on goods and also explored the components of elasticity and other factors in the demand curve.
Key Terms
Market: Any place where people come together to buy and sell goods or services.
Demand: The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific period.
Law of Demand: A law stating that as the price of a good increases, the quantity demanded of the good decreases, and that as the price of a good decreases, the quantity demanded of the good increases.
Quantity Demanded: The number of units of a good purchases at a specific price.
Law of Diminishing Marginal Utility: A law stating that as a person consumes additional unites of a good, eventually the utility gained from each additional unit of the good decreases.
Demand Schedule: The numerical representation of the law of demand.
Demand Curve: The graphical representation of the law of demand.
Normal Good: A good for which the demand rises as income rises and falls as income falls.
Inferior Good: A good for which the demand falls as income rises and rises as income falls.
Neutral Good: A good for which the demand remains unchanged as income rises or falls.
Substitute: A similar good. With substitutes, the price of one and the demand for the other move in the same direction.
Complement: A good that is consumed jointly with another good. With complements, the price of one and the demand for the other move in opposite directions.
Elasticity of Demand: The relationship between the percentage change in quantity demanded and the percentage change in price.
Elastic Demand: The type of demand that exists when the percentage change in quantity demanded is greater than the percentage change in price.
Inelastic Demand: The type of demand that exists when the percentage change in quantity demanded is less than the percentage change in price.
Unit-Elastic Demand: The type of demand that exists when the percentage change in quantity demanded is the same as the percentage change in price.
Market Demand for PTHS
Does the law of demand hold true?
The law of demand states that as the price of a good increases, the quantity demanded of the good decreases. Likewise, as the price decreases, the quantity demanded increases. It is very clear that our survey of the 20 ounce bottles of soda follows the law of demand. The highest quantity demanded was 281 bottles at 25¢ each. The lowest quantity demanded was zero bottles of soda at $2.50.
What is the elasticity of demand?
The elasticity of demand for soda is...well, I don't know. =\
Is it elastic, inelastic, or unit elastic?
Probably elastic, but I don't know how to figure that out.
What is the total revenue for each example? Which option is the best if you wanted the best profit maximizing option?
The total revenue for each price is listed in the table. In order to make the most profit, it is shown that 20 oz. bottles of soda should be sold at $0.75. This resulted in total revenue of $136.50.
Are there any products that are complements? Does it have any substitutes? If so, what are they?
Complements to soda are pizza, hot dogs, popcorn, or any food of the like. Substitutes would be sparkle water, juices, energy drinks, Gatorade, etc.
Is this product a normal good or an inferior good?
This good is a normal good. When people have more spending money, they are likely to buy more soda pop than if they had limited spending money.
To be considered a demand, the consumer must be willing and able to buy the product.
Does the law of diminishing marginal utility hold true in this example? Why or why not?
Yes, the law of diminishing marginal utility holds true with soda. The law states that “as a person consumes additional units of a good, eventually the utility gained from each additional unite of the good decreases”. This essentially means that the more a person consumes of a good, the more tired they will become of consuming it. In this example, the first bottle of soda is more satisfying than, say, the third bottle.
Does the income effect have any influence on the market demand at PTHS? Explain your answer.
Yes; as stated above, when people have more spending money, their demand for soda increases. However, the demand for soda decreases when people have less spending money.
Explain the difference between demand and quantity demanded.
Demand is defined as the willingness and ability to buy a product at a certain price. Quantity demanded is the number of units of a good purchased at a certain price.
The law of demand states:
The law of demand states that as the price of a good increases, the demand of the good decreases. In the same way, when the price of a good decreases, the demand for the good increases.
What did you learn from this activity?
This activity clarified that the price of a good can greatly change the demand for the good. It also illustrates the law of demand. Also, this activity showed that students at PTHS love soda. =]
This chapter focuses on the concept of demand in economics. Demand is the willingness and ability to buy a product at a certain price. The use and ability to produce demand schedules and curves is also explored, as well as the factors that shift the demand curves. Elasticity is introduced, giving an insight on the relationship between the price and quantity demanded of a good.
In order to get a connection with demand in our own world, the class was asked to come up with a good and different prices for the good. Then, the class needed to survey people and ask how much of the good would be bought at the specified prices. This activity showed the effects of price on goods and also explored the components of elasticity and other factors in the demand curve.
Key Terms
Market: Any place where people come together to buy and sell goods or services.
Demand: The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific period.
Law of Demand: A law stating that as the price of a good increases, the quantity demanded of the good decreases, and that as the price of a good decreases, the quantity demanded of the good increases.
Quantity Demanded: The number of units of a good purchases at a specific price.
Law of Diminishing Marginal Utility: A law stating that as a person consumes additional unites of a good, eventually the utility gained from each additional unit of the good decreases.
Demand Schedule: The numerical representation of the law of demand.
Demand Curve: The graphical representation of the law of demand.
Normal Good: A good for which the demand rises as income rises and falls as income falls.
Inferior Good: A good for which the demand falls as income rises and rises as income falls.
Neutral Good: A good for which the demand remains unchanged as income rises or falls.
Substitute: A similar good. With substitutes, the price of one and the demand for the other move in the same direction.
Complement: A good that is consumed jointly with another good. With complements, the price of one and the demand for the other move in opposite directions.
Elasticity of Demand: The relationship between the percentage change in quantity demanded and the percentage change in price.
Elastic Demand: The type of demand that exists when the percentage change in quantity demanded is greater than the percentage change in price.
Inelastic Demand: The type of demand that exists when the percentage change in quantity demanded is less than the percentage change in price.
Unit-Elastic Demand: The type of demand that exists when the percentage change in quantity demanded is the same as the percentage change in price.
Market Demand for PTHS
Does the law of demand hold true?
The law of demand states that as the price of a good increases, the quantity demanded of the good decreases. Likewise, as the price decreases, the quantity demanded increases. It is very clear that our survey of the 20 ounce bottles of soda follows the law of demand. The highest quantity demanded was 281 bottles at 25¢ each. The lowest quantity demanded was zero bottles of soda at $2.50.
What is the elasticity of demand?
The elasticity of demand for soda is...well, I don't know. =\
Is it elastic, inelastic, or unit elastic?
Probably elastic, but I don't know how to figure that out.
What is the total revenue for each example? Which option is the best if you wanted the best profit maximizing option?
The total revenue for each price is listed in the table. In order to make the most profit, it is shown that 20 oz. bottles of soda should be sold at $0.75. This resulted in total revenue of $136.50.
Are there any products that are complements? Does it have any substitutes? If so, what are they?
Complements to soda are pizza, hot dogs, popcorn, or any food of the like. Substitutes would be sparkle water, juices, energy drinks, Gatorade, etc.
Is this product a normal good or an inferior good?
This good is a normal good. When people have more spending money, they are likely to buy more soda pop than if they had limited spending money.
To be considered a demand, the consumer must be willing and able to buy the product.
Does the law of diminishing marginal utility hold true in this example? Why or why not?
Yes, the law of diminishing marginal utility holds true with soda. The law states that “as a person consumes additional units of a good, eventually the utility gained from each additional unite of the good decreases”. This essentially means that the more a person consumes of a good, the more tired they will become of consuming it. In this example, the first bottle of soda is more satisfying than, say, the third bottle.
Does the income effect have any influence on the market demand at PTHS? Explain your answer.
Yes; as stated above, when people have more spending money, their demand for soda increases. However, the demand for soda decreases when people have less spending money.
Explain the difference between demand and quantity demanded.
Demand is defined as the willingness and ability to buy a product at a certain price. Quantity demanded is the number of units of a good purchased at a certain price.
The law of demand states:
The law of demand states that as the price of a good increases, the demand of the good decreases. In the same way, when the price of a good decreases, the demand for the good increases.
What did you learn from this activity?
This activity clarified that the price of a good can greatly change the demand for the good. It also illustrates the law of demand. Also, this activity showed that students at PTHS love soda. =]
