CONSUMERS AND CONSUMERS AND DEMANDDEMAND

A. The Law of DemandA. The Law of Demand

1. Demand = the amount of a good or 1. Demand = the amount of a good or service that consumers are willing and service that consumers are willing and able to buy at different pricesable to buy at different prices

2. Law of demand = consumers are willing 2. Law of demand = consumers are willing and able to buy more of a product or and able to buy more of a product or service as the price goes downservice as the price goes down

3. Things 3. Things are notare not in demand when people in demand when people want something but can’t pay for themwant something but can’t pay for them

4. A demand curve - as prices go down, 4. A demand curve - as prices go down, people are willing and able to buy morepeople are willing and able to buy more

B. Change in DemandB. Change in Demand

1. Price can affect demand1. Price can affect demand

2. Availability of a product or service 2. Availability of a product or service can can affect demand affect demand

3. People’s likes and dislikes can affect 3. People’s likes and dislikes can affect demanddemand

4. Demand curve – if it shifts to the 4. Demand curve – if it shifts to the right, it right, it means demand has means demand has increasedincreased

THE DEMAND CURVETHE DEMAND CURVE

C. Income and Substitute C. Income and Substitute GoodsGoods

1. Income affects demand - how much 1. Income affects demand - how much money a person makes!money a person makes!

2. Substitute goods affect demand 2. Substitute goods affect demand

3. A substitute good is a good or service 3. A substitute good is a good or service that can take the place of anotherthat can take the place of another

(these goods are (these goods are “interchangeable” - “interchangeable” - demand for one demand for one will affect the other)will affect the other)

SUBSTITUTE GOODSSUBSTITUTE GOODS

D. Complementary Goods and D. Complementary Goods and DemandDemand

1. Complementary = goods and services 1. Complementary = goods and services that are that are often used togetheroften used together

(ie: peanut butter and jelly; (ie: peanut butter and jelly; spaghetti and tomato sauce)spaghetti and tomato sauce)

2. The price of the good or service of one 2. The price of the good or service of one will will affect the demand for the otheraffect the demand for the other

(ie: if the price of peanut butter goes (ie: if the price of peanut butter goes up, the up, the demand for jelly will drop)demand for jelly will drop)

COMPLEMENTARY GOODSCOMPLEMENTARY GOODS