1. Introduction to Demand and the
factors that determine demand

2. Through various incentives, CONSUMERS
seek to maximize their satisfaction
Consumers want to get the most
for their money
The behavior of consumers is called . . .

3. • The amount people are willing to buy at ALL prices.
• The ENTIRE schedule or curve is the demand
12
Price Quantity 10
10 20 8
Price
6
8 40
4
6 60 D
2
4 80 0
2 100 20 40 60 80 100
Quantity

4. 12
10
8
Price 6
4
D
2
0
20 40 60 80 100
Quantity
• ALWAYS has a negative slope
• It shows a negative relationship between price
and quantity
• Therefore, the law of demand states that, all things
equal, as price rises, quantity demanded falls, and
as price falls, quantity demanded rises.

5. 12
10
8
Price 6
D1
4
2 D
D2
0
20 40 60 80 100
Quantity
• Sometimes, the demand for a product will change, at
ALL prices
• It may cause an increase in demand,
• or a decrease in demand

6. Variables that cause a change in demand are called
Determinants of Demand
They are:
Income
Prices of Related Goods
Tastes
Population
(Number of Buyers)
Expectations

7. Determinants of Demand
Income
The number of items people are willing to buy is
determined by how much money they have. Simply, the
more money you have the more you can buy.
If the demand for an item falls when income falls, the
good is called a normal good
If the demand for an item rises when income falls, the
good is called an inferior good

8. Determinants of Demand
Prices of Related Goods
A change in the price of one good can cause a change in
the demand for another, related good
Substitutes
• Items that may be used in place of each other
• when a fall in the price of one good reduces the
demand for another good, or when a rise in the price of
one good increases the demand for another good

9. Determinants of Demand
Prices of Related Goods
A change in the price of one good can cause a change in
the demand for another, related good
Complements
• Items that are often used together
• when a fall in the price of one good increases the
demand for another good, or when a rise in the price of
one good reduces the demand for another good

10. Determinants of Demand
Tastes
What people want at any given moment
Usually reflected in what is popular as opposed to what
is unpopular at the time

11. Determinants of Demand
Population (Number of Buyers)
Population of a given area (more or less buyers)
An increase in population results in an increase in demand
A decrease in population results in a decrease in demand

12. Determinants of Demand
Expectations
The ability to predict what will come will cause people to
react differently in the market

14. Quantity Demanded is a specific point on the curve or
schedule. Quantity
12 12
Demanded at
10
Demand
10 $6
8 8
Price
Price
6 6
4 4
2 2
0 0
20 40 60 80 100 20 40 60 80 100
Quantity Quantity
Price Quantity Quantity
Price Quantity
10 20 Demand Demanded at
$6 6 60
8 40
6 60 It shows the quantity of an item that will be
4 80 purchased at a single given price
2 100

15. 12
The Quantity
Demanded
10
changed from
8 60 to 40
Price
6
4
2
0
20 40 60 80 100
Quantity
• A change in the quantity demanded results in a
move from one point to another
• all things equal, this is caused by a change in the
price (not one of the determinants of demand)

16. Supply