Chapter 4: DemandChapter 4: DemandZachary McguireZachary Mcguire

Desi DiazDesi DiazMargarida Coimbra Margarida Coimbra

Nicole GonzalezNicole GonzalezAndrea GuitierrezAndrea Guitierrez

Key termsKey terms► DemandDemand-- The desire to own something and the ability to pay for The desire to own something and the ability to pay for

it. it. ► Law of demand-Law of demand- Consumers buy more of a good when its price Consumers buy more of a good when its price

decreases. And less when it’s price increase.decreases. And less when it’s price increase.► Substitution effect-Substitution effect- When consumers react to an increase in a When consumers react to an increase in a

goods price by consuming less of that good and more of the goods price by consuming less of that good and more of the other goodsother goods

► Income effect- The change in consumption resulting from a The change in consumption resulting from a change in real income change in real income

► Demand schedule-Demand schedule- A table that lists the quantity of a good A table that lists the quantity of a good person will buy at each different price.person will buy at each different price.

► Market demand schedule-Market demand schedule- A table that lists the quantity of a A table that lists the quantity of a good all consumers in a market will buy at each different price.good all consumers in a market will buy at each different price.

► Demand curve-Demand curve- A graphic presentation of a demand schedule. A graphic presentation of a demand schedule.

The Law of DemandThe Law of Demand► The law of Demand is “when a good’s price is lower The law of Demand is “when a good’s price is lower

consumers will buy more of it” the law of demand is like a consumers will buy more of it” the law of demand is like a double edge sword. This is basically as a goods price goes double edge sword. This is basically as a goods price goes down the demand for that good goes up. And vise versa as a down the demand for that good goes up. And vise versa as a goods price goes up the quality demand goes down. For goods price goes up the quality demand goes down. For example, your neighborhood sandwich store sell sandwiches example, your neighborhood sandwich store sell sandwiches for a dollar and fifty cents ($1.50) more people will buy the for a dollar and fifty cents ($1.50) more people will buy the sandwich increasing the number of sandwiches made. But if sandwich increasing the number of sandwiches made. But if the owner increases its prices to three dollars and fifty cents the owner increases its prices to three dollars and fifty cents ($3.50) less people would buy it therefore less sandwiches will ($3.50) less people would buy it therefore less sandwiches will be made. . The law of demand is a combination of two be made. . The law of demand is a combination of two different patterns. Those two different patterns are called different patterns. Those two different patterns are called substitution effect and income effect.substitution effect and income effect.

The Substitution EffectThe Substitution Effect► The substitution effect is simple the substitution effect is The substitution effect is simple the substitution effect is

when consumers react to increased price change of that good when consumers react to increased price change of that good by either consuming less of that good or more of another by either consuming less of that good or more of another good. For instance If that neighborhood sandwich store raise it good. For instance If that neighborhood sandwich store raise it prices and becomes more expensive compared to other foods prices and becomes more expensive compared to other foods like pizza and burgers people will more likely purchase pizza like pizza and burgers people will more likely purchase pizza and burgers as a substitute for sandwiches. Which causes less and burgers as a substitute for sandwiches. Which causes less demand for sandwiches. The change in spending is also demand for sandwiches. The change in spending is also known as the substitution effect.known as the substitution effect.

Income EffectIncome Effect► Income effect is the change in consuming certain goods due Income effect is the change in consuming certain goods due

to the change in that person’s income. Meaning you will to the change in that person’s income. Meaning you will purchase less of those goods due to less income. Have you purchase less of those goods due to less income. Have you ever had the feeling that your getting poorer that your money ever had the feeling that your getting poorer that your money doesn’t go as far as it used to it is because your budget doesn’t go as far as it used to it is because your budget becomes more limited and you feel like you have less money. becomes more limited and you feel like you have less money. Another example is your at school and a teacher sells bagels Another example is your at school and a teacher sells bagels for $1.00 then the price raises up to $2.00 you probably will for $1.00 then the price raises up to $2.00 you probably will still buy bagels just not as many as you use to instead of still buy bagels just not as many as you use to instead of buying two you will limit your purchase to one because you buying two you will limit your purchase to one because you will not have enough money.will not have enough money.

References References ► Second slide: : http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078- http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-

8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=false %3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=false http://www.google.com/images?http://www.google.com/images?hl=en&sugexp=gsih&xhr=t&q=the+law+of+demand&cp=12&qe=dGhlIGxhdyBvZiBk&qesig=ex0kdtVeRrLyW5GRR54jPA&pkc=AFgZ2tlnEhl=en&sugexp=gsih&xhr=t&q=the+law+of+demand&cp=12&qe=dGhlIGxhdyBvZiBk&qesig=ex0kdtVeRrLyW5GRR54jPA&pkc=AFgZ2tlnEBbGuCpYRiH5STjQkhHic2ptNJrf92jg6INohC7bBtyljUd9-F0q70NnxnFmMBhGIIGTtnM-BbGuCpYRiH5STjQkhHic2ptNJrf92jg6INohC7bBtyljUd9-F0q70NnxnFmMBhGIIGTtnM-_qsYAlKJtI7dmHqKPw&bav=on.2,or.r_gc.r_pw.&wrapid=tljp1300847114268022&um=1&ie=UTF-_qsYAlKJtI7dmHqKPw&bav=on.2,or.r_gc.r_pw.&wrapid=tljp1300847114268022&um=1&ie=UTF-8&source=og&sa=N&tab=wi&biw=1230&bih=5408&source=og&sa=N&tab=wi&biw=1230&bih=540

► Third slideThird slide: : http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-eventType=openIEXT&ISBN=0-13-116078-8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJav%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=falseascript=false

► FourthFourth slide slide :http://www.google.com/imgres?imgurl=https://static.flatworldknowledge.com/sites/all/files/:http://www.google.com/imgres?imgurl=https://static.flatworldknowledge.com/sites/all/files/imagecache/book/28239/fwk-rittenberg-fig07_005.jpg&imgrefurl=http://www.flatworldknowledge.com/node/imagecache/book/28239/fwk-rittenberg-fig07_005.jpg&imgrefurl=http://www.flatworldknowledge.com/node/73569&usg=__7ak8ycJntvkz_oYxC8BWiv4DMIk=&h=336&w=412&sz=14&hl=en&start=0&sig2=4aT9nzf2kQpvD73569&usg=__7ak8ycJntvkz_oYxC8BWiv4DMIk=&h=336&w=412&sz=14&hl=en&start=0&sig2=4aT9nzf2kQpvD6yNIhTLzQ&zoom=1&tbnid=VM1lyqOBYbjyPM:&tbnh=113&tbnw=139&ei=cmCJTaGbFIGCtgeWoJH9DQ&prev=/6yNIhTLzQ&zoom=1&tbnid=VM1lyqOBYbjyPM:&tbnh=113&tbnw=139&ei=cmCJTaGbFIGCtgeWoJH9DQ&prev=/images%3Fq%3Dsubstitution%2Beffect%26um%3D1%26hl%3Den%26biw%3D1230%26bih%3D540%26tbsimages%3Fq%3Dsubstitution%2Beffect%26um%3D1%26hl%3Den%26biw%3D1230%26bih%3D540%26tbs%3Disch:1&um=1&itbs=1&iact=hc&vpx=537&vpy=226&dur=4361&hovh=203&hovw=249&tx=129&ty=164&o%3Disch:1&um=1&itbs=1&iact=hc&vpx=537&vpy=226&dur=4361&hovh=203&hovw=249&tx=129&ty=164&oei=cmCJTaGbFIGCtgeWoJH9DQ&page=1&ndsp=23&ved=1t:429,r:19,s:0ei=cmCJTaGbFIGCtgeWoJH9DQ&page=1&ndsp=23&ved=1t:429,r:19,s:0

► Fifth slide :Fifth slide :http://www.google.com/images?um=1&hl=en&biw=1230&bih=540&tbs=ischhttp://www.google.com/images?um=1&hl=en&biw=1230&bih=540&tbs=isch%3A1&sa=1&q=broke&aq=f&aqi=g10&aql=&oq= %3A1&sa=1&q=broke&aq=f&aqi=g10&aql=&oq=

► http://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-8&ISBNUrl=%2FiTexthttp://www.pearsonsuccessnet.com/snpapp/iText/BrowseITEXTServlet?eventType=openIEXT&ISBN=0-13-116078-8&ISBNUrl=%2FiText%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-%2Fproducts%2F0-13-116078-8%2Findex.html&ITEXTOID=0-13-116078-8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics8&EnrollmentOID=9AE3B51ECA2177C0E040A00A7D3403B9&DisplayTitle=Economics%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=false%3A+Principles+in+Action&TitleInFrame=Y&classPeriodOid=dfe06e4bf6264ef380478e9cb7a34380&isbnUrlIsJavascript=false

Chapter 4Section: 1

Presented by: Nicole Gonzalez

Demand Schedule► Law of demand- The cost of a product and how it affects the

quantity demanded of that item.

Understanding Demand►“To have demand for a good” You

need to have enough money to be able to buy the good that you want or need. If you can not afford it then you can not buy it.

► Market Demand Schedule- Shows the quantities demanded at each price by all consumers in the market.

► A demand schedule shows how much a product/good cost and the quantity demanded per day. It also is separated into two groups (Individual Demand Schedule and Market Demand Schedule)

► Individual demand- Shows specific quantities that a person is willing to be able to purchase at a specific price.

► Market demand- Shows the quantities demanded at each price by all consumers in the market.

How are they different?►The difference between the two

demand schedules is that the market schedule list larger quantities of demand.

Demand Curve► A demand curve is a graphic representation of a

demand schedule.► The market demand curve can be used to show

how people change their buying habits when prices go up or down.

► Market Demand Curve

Resources►Information: Text book►Picture 1:http://www.amosweb.com/images/MkDm31.gif

►Picture 2:http://mlm.business-opportunities.biz/wp-content/uploads/2007/09/no-money-2.jpg

►Picture 3:http://mises.org/rothbard/mes/images/Table%206.gif

►Picture 4:http://www.bized.co.uk/sites/bized/files/images/mdemand.gif

Chapter 4: Section 2Shifts of the Demand

CurveZachary Mcguire

Vocabulary Words► Ceteris paribus- Latin term that means "all

other things held constant”► Normal good- a good that consumers demand

more of when their incomes increase► Inferior goods- a good that consumers demand

less of when their incomes increase► Complements- two goods that are bought and

used together► Substitutes- goods used in place of one

another

Changes in Demand► A demand curve is only accurate as long as there are

no changes other than price that could affect the consumers decision

► When we drop the ceteris paribus rule and allow other factors to change we no longer move along the demand curve

► A shift in the demand curve means that at every price consumers buy a different quantity than before (This shift of the entire curve is what economists refer to as a change in demand)

Pg. 85 online textbook

What Causes a Shift?Income:► A consumers income affect his or her

demand for most goods► Most goods that we purchase are normal

goods► There are also goods called inferior goods

Pg. 86 online textbook

What Causes a Shift? contd.Consumer Expectations► Our expectations for the future can affect our

demand for goods today► The current demand is positively related to its

expected price in the futurePopulation► Changes in size will also affect the demand for most

goods

Pg.87 online textbook

What Causes a Shift? contd.Consumer taste and Advertising► Changes in tastes cannot be explained by changes

in income or population or worries about future prices

► Advertising is considered a factor that shifts the demand curve because it plays an important role in many trends

Prices of Related Goods► The demand curve for one good can be affected by

a change in the demand of another

Pg 87-88 online textbook

Chapter 4 – Section 3Margarida Coimbra, P2

► Elasticity of Demand: a measure of how consumers react to a change in a price.

► Inelastic: describes demand that isn’t sensitive to a change in price.ex – a good that one will keep on

buying no matter the increase in price – medicine.

► Elastic: describes demand that is very sensitive to a change in price.ex – a good that one will stop buying

due to the increase in price – magazines.

Calculating Elasticity

Elasticity = (Percentage change in quantity of demand) / (Percentage change in price)

Percentage Change = (Original Number – New Number) / (Original Number) x 100

Law of demand implies that the result will always be negative:► - A increase in the price of a good will always

decrease the quantity demanded.► - A decrease in the price of a good will always

increase the quantity demanded.

► The price of elasticity of demand for a good varies at every price level.ex – would you still buy a

magazine which price was raised 20cents? What if it was raised $2,00?

► Values of Elasticity have precise mathematical definitions:

Inelastic < 1 < ElasticUnitary Elasticity: = 1

► When unitary the percentage change in quantity demanded is exactly equal to the percentage change in price.

Factor Affecting Elasticity► Availability of Substitutes

Ex: Life-saving medicine – no substitutes Orange juice – substitutes (other brands)

► Relative ImportanceThe higher the jump in price,

the more you will have to adjust your purchase. Although some demands are always inelastic because their consumption is always low.

► Necessities vs. Luxuriesex: milk – always inelastic

cow meat – elastic

► Change Over Time- When price changes

consumers often need time to change their shopping habits.

- Consumers don’t always react quickly to a price increase because it takes time to find substitutes.

- ex: gasoline rise led consumers to buy smaller cars.

References

► Second Slide

http://www.google.com/imgres?imgurl=http://www.crawfordsworld.com/rob/ape/APEMcConnellNotes/McConnellImages/linear_demand.gif&imgrefurl=http://www.crawfordsworld.com/rob/ape/APEMcConnellNotes/M1McConnell018.html&usg=__uh_er8PntldGvKKwdu-F0y4YasI=&h=362&w=399&sz=5&hl=en&start=0&zoom=1&tbnid=dUbG1_5htDj4yM:&tbnh=123&tbnw=132&ei=1JSITYrRFsu3twfM6qjoDQ&prev=/images%3Fq%3Delasticity%2Bof%2Bdemand%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=hc&vpx=444&vpy=237&dur=297&hovh=214&hovw=236&tx=153&ty=136&oei=1JSITYrRFsu3twfM6qjoDQ&page=1&ndsp=15&ved=1t:429,r:7,s:0

http://www.google.com/imgres?imgurl=http://www.babble.com/CS/blogs/strollerderby/2007/08/16-22/cough-medicine-babies.jpg&imgrefurl=http://www.babble.com/CS/blogs/strollerderby/archive/tags/cold%2Bmedicine/default.aspx&usg=__ZmG2lVwN6bEtUDqZ7n4bvcXR7Ks=&h=480&w=400&sz=31&hl=en&start=0&zoom=1&tbnid=d6k7pbJGmzdkfM:&tbnh=136&tbnw=108&ei=ApWITdjdLo6TtwfZ58DlDQ&prev=/images%3Fq%3Dmedicine%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=hc&vpx=610&vpy=226&dur=16&hovh=246&hovw=205&tx=81&ty=120&oei=ApWITdjdLo6TtwfZ58DlDQ&page=1&ndsp=17&ved=1t:429,r:9,s:0

http://www.google.com/imgres?imgurl=http://keetsa.com/blog/wp-content/uploads/2008/08/magazines.jpg&imgrefurl=http://keetsa.com/blog/reduce/do-you-use-digital-versions-of-magazines/&usg=__kt81WFbxAPlAJSVoh3qlikSV9Mw=&h=300&w=460&sz=75&hl=en&start=0&zoom=1&tbnid=YLsYH3C7HEkVVM:&tbnh=106&tbnw=163&ei=F5WITdGWHYabtwek-dzcDQ&prev=/images%3Fq%3Dmagazines%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=hc&vpx=109&vpy=113&dur=2015&hovh=181&hovw=278&tx=194&ty=97&oei=F5WITdGWHYabtwek-dzcDQ&page=1&ndsp=15&ved=1t:429,r:0,s:0

► Fourth Slide

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http://www.google.com/imgres?imgurl=http://www.tradingnrg.com/wp-content/uploads/2010/12/spot-gold-price-and-supply-demand-of-gold-2004-2010-percenct-change.jpg&imgrefurl=http://www.tradingnrg.com/the-gold-rush-is-there-a-bubble-in-the-gold-market-a-short-analysis/&usg=__waxKpWWsVoPs37OWsmAOiH0efyo=&h=197&w=862&sz=34&hl=en&start=0&zoom=1&tbnid=HTJvIgRuAcx2sM:&tbnh=44&tbnw=193&ei=YImITemwDs610QGPmPj2DQ&prev=/images%3Fq%3Dpercentage%2Bchange%2Bdemand%26hl%3Den%26biw%3D1020%26bih%3D583%26gbv%3D2%26tbs%3Disch:10%2C268&itbs=1&iact=hc&vpx=508&vpy=163&dur=28234&hovh=107&hovw=470&tx=218&ty=73&oei=AYmITcOcEojfgQe2zNnADQ&page=1&ndsp=15&ved=1t:429,r:14,s:0&biw=1020&bih=583

► Fifth Slide

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http://www.google.com/imgres?imgurl=http://mrski-apecon-2008.wikispaces.com/file/view/unit_elastic/41643819/unit_elastic&imgrefurl=http://mrski-apecon-2008.wikispaces.com/Chapter%2BFive&usg=__fFFR0DphAjdOBNmsTjxmWAI3TfQ=&h=421&w=468&sz=8&hl=en&start=0&zoom=1&tbnid=Ii9AEsNh9kRWGM:&tbnh=136&tbnw=151&ei=F4yITY .

► Sixth Slide

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http://www.google.com/imgres?imgurl=http://www.hung-truong.com/blog/wp-content/uploads/2007/11/simplyorange.jpg&imgrefurl=http://www.hung-truong.com/blog/2007/11/02/orange-juice-snobbery/&usg=__CwW9jexUd50HvzLn8xuPY4iIVw4=&h=257&w=380&sz=24&hl=en&start=17&zoom=1&tbnid=bQ1zutFYrVVjuM:&tbnh=128&tbnw=226&ei=MY-ITcD2IZG-0QG3m_DlDQ&prev=/images%3Fq%3Dorange%2Bjuice%2Bbrands%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C627&um=1&itbs=1&iact=hc&vpx=267&vpy=95&dur=406&hovh=185&hovw=273&tx=148&ty=80&oei=146ITdDdFMTUgAfmq5nIDQ&page=2&ndsp=17&ved=1t:429,r:7,s:17&biw=1004&bih=583

http://www.google.com/imgres?imgurl=http://lodestonedynamics.com/wp-content/uploads/2010/11/shoelace.jpg&imgrefurl=http://lodestonedynamics.com/2010/12/33-ways-to-tie-shoelaces/&usg=__izC0VslxLIDcE-ZCEzJLaALpVaU=&h=260&w=391&sz=13&hl=en&start=17&zoom=1&tbnid=SwnANgAGlmwcVM:&tbnh=128&tbnw=195&ei=kY-ITbjtIYnC0QG-qtSJDg&prev=/images%3Fq%3Dshoe%2Blaces%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C175&um=1&itbs=1&iact=hc&vpx=126&vpy=321&dur=2046&hovh=183&hovw=275&tx=184&ty=146&oei=ho-ITdHBIsbFgAeo9ri0DQ&page=2&ndsp=16&ved=1t:429,r:0,s:17&biw=1004&bih=583

► Seventh Slide

http://www.google.com/imgres?imgurl=http://eraven.franklinpierce.edu/exch/72/72MilkBone.jpg&imgrefurl=http://eraven.franklinpierce.edu/exch/72/index.shtml&usg=__gCFmNYh72_4m266cOV2SRLGToTY=&h=520&w=360&sz=31&hl=en&start=35&zoom=1&tbnid=jXHitrJmqKh0CM:&tbnh=134&tbnw=105&ei=5ZCITYqbDpOWtweL4In2DQ&prev=/images%3Fq%3Dmilk%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C850&um=1&itbs=1&iact=hc&vpx=251&vpy=164&dur=141&hovh=270&hovw=187&tx=122&ty=164&oei=2pCITYyGPMmTtwfB2dHuDQ&page=3&ndsp=16&ved=1t:429,r:1,s:35&biw=1004&bih=583

http://www.google.com/imgres?imgurl=http://lh6.ggpht.com/_Dmkg-B8xkk0/SjrWQFnXksI/AAAAAAAAAw8/3___cs8BJoQ/Price%2520per%2520Gallon.jpg&imgrefurl=http://www.mommybytes.com/2009_06_01_archive.html&usg=__Q8mCpPJkYsU10jG-0aYpLix-WqE=&h=411&w=539&sz=41&hl=en&start=18&zoom=1&tbnid=YXQ6MKPUE2nq-M:&tbnh=123&tbnw=161&ei=wpGITfeZHYe3twe5m8XjDQ&prev=/images%3Fq%3Dgasoline%2Bprice%2Blast%2B50%2Byears%2BUSA%2Bgraph%26um%3D1%26hl%3Den%26biw%3D1004%26bih%3D583%26tbs%3Disch:10%2C525&um=1&itbs=1&iact=hc&vpx=132&vpy=276&dur=3484&hovh=196&hovw=257&tx=168&ty=136&oei=rJGITZ_eMIWatwexkcT-DQ&page=2&ndsp=13&ved=1t:429,r:9,s:18&biw=1004&bih=583

► Information taken from Economics Workbook.

Chapter 4Section 3: Elasticity and Revenue

Elasticity and Revenue►Important to study Economics because

elasticity helps measure how consumers respond to price changes for different and various products.

►Demand determines how change in prices affect a firm’s total revenue or income.

Total Revenue►Total Revenue: Total amount of

money a firm receives by selling goods or services.

► Determined by two factors: Price of the goods. Quantity sold.

Revenue TablePrice of slice of pizza:

Quantity demanded per day:

Total Rev.:

.50 300 $150.00$1.00 250 $250.00$1.50 200 $300.00$2.00 150 $300.00$2.50 100 $250.00$3.00 50 $150.00

ELASTIC DEMAND►Elastic: Buy much less of a good after

a small price increase.►Price of product is lowered, the total

revenue rises.►Price of product is raised, the total

revenue falls.

INELASTIC DEMAND►Inelastic: Demand for a good that you

will continue to keep buying despite price increase.

►Price of product is lowered, the total revenue falls.

►Price of product is raised, the total revenue rises.