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Assignment 5. Demand

Learning Objectives

At the end of the lesson student will be able to:

• Describe how a competitive market works by the supply and demand model. Define and illustrate demand through schedules and graphs.

• Examine the inverse relationship existing between quantity demanded and price. Evaluate the Law of Demand. Focus on diminishing marginal utility.

• Distinguish between change(s) in quantity demanded and change(s) in demand.

• Identify and explain the variables that cause a change in demand.

• Illustrate graphically a change in demand versus a change in quantity demanded.

Main Contents

1. The demand curve.

2. Law of demand

3. Determinants of demand / Shifts of the demand curve

o Changes in the prices of related goods

o Changes in income

o Changes in tastes / preferences

o Changes in expectations

o Changes in the number of costumers

4. Changes in quantity demanded

Resources

• McConnell, Campbell; Brue, Stanley; and Flynn, Sean. “Economics, Principles, Problems, and Policies”. 18th Edition, New York, 2009. , Chapters 3 Chapters 3, pages 45-51

• Ray, Margaret; and Anderson, David. “Krugman’s Macroeconomics for AP”. Worth Publishers/BFW, 2011

• Anderson, David. “Economics by Examples”. Worth Publishers/BFW, 2007

• From Khan Academy, see the following Videos.

o Law of demand.

o Price of related products and demand. economics-finance-domain/microeconomics/supply-demand-equilibrium/modal/v/price-of-related-products-and-demand

o Change in expected future prices and demand.

o Changes in income, population, or preferences.

o Normal and inferior goods.

o What factors change demand?

• Amadeo, Kimberly. Demand Explanation and Its Impact. The Balance.

Online Resources

• OpenStax College. Principles of Economics

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Vocabulary and Key Terms

• Market

• Demand

• Demand schedule

• Law of demand

• Diminishing marginal utility

• Income effect

• Demand curve

• Determinants of demand

• Normal goods

• Inferior goods

• Substitute goods / Complementary goods

• Changes in demand / Shift of the curve

• Change in quantity demanded / movement along the demand curve

• Individual demand curve / market demand curve

Study questions

1. Use the following information to represent a demand curve. Explain why the demand curve is down sloping.

|Demand for Corn |

|Price per bushel ($) |Quantity demanded per week |

|5 |10 |

|4 |20 |

|3 |35 |

|2 |55 |

|1 |80 |

2. Explain the law of demand. Why does a demand curve slope downward? How a market demand curve is derived from individual demand curves?

3. What are the determinants of demand? What happens to the demand curve when any of these determinants change? Distinguish between a change in demand and a change in the quantity demanded, noting the cause(s) of each.

4. What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car?

a. Small automobiles become more fashionable.

b. The price of large automobiles rises (with the price of small autos remaining the same).

c. Income declines and small autos are an inferior good.

d. Consumers anticipate that the price of small autos will greatly come down in the near future.

e. The price of gasoline substantially drops.

ECON Lowdown: .

Log in as a STUDENT by using the information you are receiving via e-mail (Student Code and Password). See the videos listed below. . Quiz score will count as a quiz grade.

• Demand , by 10/14/2018

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