Supply &

DemandUnit 1

iPhone 6

Price Quantity

$600$300$100

MilkPrice Quantity$2.00$4.00$6.00$8.00

$10.00

What is Market

Research?

The Big Bang Theory 5x05 - The Sword - YouTube

PRICEA neutral source on information

Allows for change in the economy

It allows freedom of choice

DEMAND

DemandDemand is the desire to have some

good or service and the ability to pay for it.

The law of demand states that when the PRICE of a good or service GOES DOWN, consumers buy MORE, meaning demand increases.

If price goes UP, demand should DECREASE.

Demand Curve

Pt.Price

of DVDs

Quantity Demande

d

A $30 0

B $25 1

C $20 2

D $15 3

E $10 4

F $5 50

Quantity

Price

1 2 4 53

5

15

20

10

25

30

A

B

C

D

E

F

DEM

AND CU

RVE

Movers vs. Shifters

Movement on the CurveChange in quantity demanded is a

change in PRICE or QUANTIY.

This will cause you to move along the curve, up/down.

We call these “movers”

Quantity

Price

A

B

C

D

E

F

Change in Quantity Demand

Moves along the curve

Demand ChangesChange in demand meanwhile is a

change in the AMOUNT YOU BUY.

This means the curve will shift to the left or to the right.

We call these “shifters”

There are six factors that influence this.

Quantity

Price

A

B

C

D

E

F

Change in Demand

B

C

D

E

F

A

Shifts left or right

6 Factors for

Change in Demand

SubstitutesSubstitutes are goods/services

that can be used in place of another good or service.

If the price of a substitute changes, people may be more/less inclined to get the original item.

Examples Pepsi or Coca Cola

Ordering Pizza or Chinese for dinner

P

Q

P

Q

Substitute’s price goes up ie. Coke

Substitute’s price goes down

PepsiPepsi

Complements

Complements are goods that are used together, so that a rise in demand in one good will increase the demand for the other good.

If a price change occurs for the complement, it will affect the demand for

the original item.

P

Q

P

Q

Complement’s price goes up

Complement’s price goes down

Cereal

Cereal

Income

People’s ability to buy certain goods is affected by their income.

If their income changes, then their ability to buy certain goods will change.

Less money means the curve will shift left, more money will shift the curve to the right.

.

P

Q

P

Q

Recession hits: Lower Incomes

Economic Growth: Higher Incomes

Dr. Pepper Dr.

Pepper

Consumer TastesPeople’s tastes are constantly changing!

Advertising influences people’s tastes.

http://www.youtube.com/watch?v=R55e-uHQna0

TermsNormal Goods – goods consumers

demand more of when their income rises.

Inferior Goods – goods that consumers demand more of when their income falls.

P

Q

P

Q

Recession hits: Generic brand goods

Economic Growth: Generic brand goods

Tops gummy bears

Tops gummy bears

Consumer Expectations If you expect a product to go

on sale, you wait to buy that product

Examples Cars

Gas

Tickle-Me-Elmo

Smart Phones

P

Q

P

Q

Consumers expect price to rise

Consumers expect price to fall

IPhone

IPhone

Market SizeThe size of the market is based

on the number of consumers.

Example People leaving Buffalo has caused a smaller

market size.

More people moving to Florida and Texas has created larger market sizes in these states.

If people leave a region, the market size will decrease meaning the curve will shift to the

left and vice versa.

P

Q

P

Q

Bigger Population Smaller Population

http://www.youtube.com/watch?v=8E0SoagJCx4

Elasticity of DemandElasticity of demand is how responsive

consumers are to price changes.

Elastic demand – quantity demanded will change greatly as price changes.

Elastic Demand

0Quantity

Price

1 2 4 53

5

15

20

10

25

30

A

BC

DE

F

DEMAND CURVE

When demand is elastic, prices will not change much, but quantity demanded will change.

Inelastic Demand

0Quantity

Price

10

20

40

50

30

5

15

20

10

25

30

A

B

C

D

E

F

DEM

AN

D C

UR

VE

Inelastic demand states that quantity demanded will change little as price changes.

Fact

ors

that

Dete

rmin

e E

last

icit

y

Is it a necessity or a luxury?

Luxury = elastic Necessity = inelastic

Are there good substitutes?Yes = Elastic No =

Inelastic

What proportion of income does it use?Large = Elastic Small =

Inelastic