© 2003 McGraw-Hill Ryerson Limited Supply and Demand Supply and Demand Chapter 4 Chapter 4 © 2003 McGraw-Hill Ryerson Limited  Laugher Curve Laugher Curve Teach a parrot the terms of supply and demand and you’ve got an economist. Thomas Carlyle © 2003 McGraw-Hill Ryerson Limited  Demand Demand ◆ Demand means a willingness and capacity to pay. © 2003 McGraw-Hill Ryerson Limited  Demand Demand ◆ Prices are the tool by which the market coordinates individual desires. © 2003 McGraw-Hill Ryerson Limited  The Law of Demand The Law of Demand ◆ Quantity demanded rises as price falls, other things constant. ◆ Quantity demanded falls as price rises, other things constant. ●    © 2003 McGraw-Hill Ryerson Limited  The Law of Demand The Law of Demand ◆ What accounts for the law of demand? ◆ People tend to substitute other goods for goods whose price has increased. © 2003 McGraw-Hill Ryerson Limited  The Demand Curve The Demand Curve ◆ The demand curve is the graphic representation of the relationship between price and quantity demanded. ◆ The demand curve slopes downward and to the right. ● ! ! © 2003 McGraw-Hill Ryerson Limited " The Demand Curve The Demand Curve ◆ The negative slope tells us that quantity demanded varies indirectly—in the opposite direction—with price. © 2003 McGraw-Hill Ryerson Limited # Other Things Constant Other Things Constant ◆ “Other things constant” in our definition of demand means that all other factors that affect the analysis are assumed to remain constant, whether they actually remain constant or not. ◆ These factors may include changing tastes, prices of other goods, even the weather. © 2003 McGraw-Hill Ryerson Limited $% D Price (per unit) 0 Quantity demanded (per unit of time) P A Q A A A Sample Demand A Sample Demand Curve, Curve, Fig. 4-1, p 84 Fig. 4-1, p 84 [...]... Shifts in Demand Versus Movements Along a Demand Curve x Demand refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant x Graphically, it refers to the entire demand curve © 2003 McGraw-Hill Ryerson Limited 4 - 12 Shifts in Demand Versus Movements Along demanded refers to aCurve a Demand specific x Quantity amount that will be demanded... to a specific point on the demand curve © 2003 McGraw-Hill Ryerson Limited 4 - 13 Shifts in Demand Versus Movements Along a Demand Curve x A movement along a demand curve is the graphical representation of the effect of a change in price on the quantity demanded © 2003 McGraw-Hill Ryerson Limited 4 - 14 Shifts in Demand Versus Movements Along demand is the graphical a Demand Curve x A shift in representation... of Demand If there is an increase in population, demand will increase at every price x With a population decrease, demand will decrease as well x © 2003 McGraw-Hill Ryerson Limited 4 - 22 The Demand Table x The demand table assumes all the following: q As price rises, quantity demanded declines q Quantity demanded has a specific time dimension to it © 2003 McGraw-Hill Ryerson Limited 4 - 23 The Demand. .. From a Demand Table to a Demand Curve x The demand curve graphically conveys the same information that is on the demand table © 2003 McGraw-Hill Ryerson Limited 4 - 26 From a Demand Table to a Demand Curve x The curve represents the maximum price that you will pay for various quantities of a good—you will happily pay less © 2003 McGraw-Hill Ryerson Limited 4 - 27 From a Demand Table to a Demand Curve,... Goods x A market demand curve is the horizontal sum of all individual demand curves q This is determined by adding the individual demand curves of all the consumers (“demanders”) © 2003 McGraw-Hill Ryerson Limited 4 - 29 Individual and Market Demand Goods In reality, the sellers do not add up individual demand curves x They estimate total market demand for their product which becomes smooth and downward... 4-3 (a and b), p 87 A Demand Table A B C D E $0.50 1.00 2.00 3.00 4.00 9 8 6 4 2 Price per cassette (in dollars) Price per Cassette rentals cassette demanded per week A Demand Curve $6.00 5.00 4.00 3.50 3.00 2.00 1.00 50 0 E D G Demand for cassettes C F B A 1 2 3 4 5 6 7 8 9 10 11 12 13 Quantity of cassettes demanded (per week) © 2003 McGraw-Hill Ryerson Limited 4 - 28 Individual and Market Demand Goods... McGraw-Hill Ryerson Limited 4 - 30 Individual and Market Demand Goods x The demand curve is downward sloping for the following reasons: q At lower prices, existing consumers buy more q At lower prices, new consumers enter the market © 2003 McGraw-Hill Ryerson Limited 4 - 31 (1) (2) (3) (2) (3) Price per Marie’s Pierre’s Cathy’s Market cassette demand demand demand demand A $.0.50 B 1.00 C 1.50 D 2.00 E 2.50... the curve) $2 $1 Fig 4-2b, p 86 B A D0 D1 250 100 200 Quantity demanded (per unit of time) © 2003 McGraw-Hill Ryerson Limited 4 - 17 Shift Factors of Demand x Shift factors of demand are factors that cause shifts in the demand curve to the right or left © 2003 McGraw-Hill Ryerson Limited 4 - 18 Shift Factors of Demand x Shift factors of demand include—but are not limited to—the following: q Society's... than price on demand x The original curve will move to the right or to the left © 2003 McGraw-Hill Ryerson Limited 4 - 15 Change in Quantity Demanded Price (per unit) Fig 4-2a, p 86 $2 $1 B Change in quantity demanded (a movement along the curve) A D1 0 100 200 Quantity demanded (per unit of time) © 2003 McGraw-Hill Ryerson Limited 4 - 16 Price (per unit) Shift in Demand, Change in demand (a shift of... - 23 The Demand Table x The demand table assumes all the following: q All the products involved are identical in shape, size, quality, etc q The schedule assumes that everything else is held constant © 2003 McGraw-Hill Ryerson Limited 4 - 24 From a Demand Table to a Demand Curve x You plot each point in the demand table on a graph and connect the points to derive the demand curve © 2003 McGraw-Hill . Ryerson Limited Supply and Demand Supply and Demand Chapter 4 Chapter 4 © 2003 McGraw-Hill Ryerson Limited  Laugher Curve Laugher Curve Teach a parrot the terms of supply and demand and you’ve. entire demand curve. © 2003 McGraw-Hill Ryerson Limited $ Shifts in Demand Shifts in Demand Versus Movements Versus Movements Along a Demand Curve Along a Demand Curve ◆ Quantity demanded. quantity demanded. © 2003 McGraw-Hill Ryerson Limited $ Shifts in Demand Shifts in Demand Versus Movements Versus Movements Along a Demand Curve Along a Demand Curve ◆ A shift in demand is