1. 4.1 The Demand Curve

2. Law of Demand • Demand indicates how much of a product consumers are both ___________and ______to buy at each possible ____________during a given period, other things remaining constant • Because demand pertains to a specific period – a day, week or month – think of demand as the _________________________ per time period at each possible price • The law of demand says that the quantity demanded varies ______________with price other things remaining constant, e.g., more of a product is demanded when the price falls

3. Demand, Wants and Needs • Consumer • Demand and wants are not the same thing; wants are ___________________ • you may want a Mercedes, but due to the high cost you may not be willing or able to pay for it • Demand is not the same as ______________ • You may be outgrowing your coat and need a new one, but if the cost is too high you may decide to stay with your old coat or buy a new one if the price drops or is cheap enough • Depending on the _____________of goods you may become willing and able to buy them

4. Substitution Effect • Substitution effect helps explain why more of a product is demanded when the price ________; it begins with unlimited wants meeting scarce resources • Many _____________and _____________are capable of satisfying particular wants; some are more desirable than others • In a world without scarcity everything would be free so you would always choose the most _____________alternative • Scarcity, is a reality, and the degree of scarcity of one good relative to another helps determine each goods _______________ ______________ • A change in the relative price – the price of one good relative to the price of another good – causes the _____________________ __________________.

5. Law of Demand (cont’d) • Income effect • Money income is the number of _________you receive per period • _____________income – your money measured in terms of how many goods and services it can buy • The satisfaction you derive from an additional unit of a product is called _______________ _____________ • The law of diminishing marginal utility states that the more of a good an individual consumes per period, other things constant, the _______________the marginal utility of each additional unit consumed • Consumers make purchases to increase their ________________or utility. In deciding what to buy, people make rough estimates about the marginal utility or benefits they expect from the good or service. Based on the marginal utility people decide what they are willing and able to pay • The law of diminishing marginal utility helps explain why people buy _______________ when the price decrease

6. Demand Schedule and Demand Curve • Demand can be expressed as a demand _________________and a demand ____________ • When you describe demand you must describe the _________being measured and the _____________ considered. • The demand schedule lists possible prices along with the ____________________demanded at each price • Demand curve is a curve or line showing the quantities of a particular good demanded at various ______________________during a given time period other things being constant

7. Demand vs. Quantity Demanded • ________________ demanded is the amount demanded at a particular price • Demand refers to the entire demand schedule or demand curve - entire ________________between price and quantity • An individual _____________on the demand curve shows the quantity demanded at a particular price while demand is the entire relationship between price and quantity.

8. Individual Demand and Market Demand • Individual Demand is the demand of an individual _______________________ • _____________________Demand is the sum of the individual demands of all consumers in the market • ______________________________ shows the total quantity demanded per period by all consumers at various prices – its simply the sum of all the individual demand curves for all consumers in the market