Quarter 3 - Module 7: Market Demand
Summary
TLDRThis educational video script delves into the concept of market demand, explaining its relationship with price and the law of demand. It clarifies that demand encompasses not just the desire but also the ability to purchase goods or services at various prices. The script debunks common misconceptions about demand and price, emphasizing the negative correlation between them. It introduces the term 'ceteris paribus' and uses it to explain shifts in the demand curve due to non-price factors like income, consumer preferences, and expectations. The script also distinguishes between normal and inferior goods, and discusses the impact of substitute and complementary goods on demand. It concludes with a call to action for viewers to reflect on the most important factor influencing their purchasing decisions.
Takeaways
- đ Demand represents the relationship between the price of a product and the quantity consumers are willing and able to purchase during a given period.
- đ The law of demand states there is a negative relationship between price and quantity demanded, meaning as price increases, quantity demanded typically decreases, assuming all other factors are constant (ceteris paribus).
- đ Ceteris paribus is an economic term meaning 'all other things being equal,' which is used to isolate the impact of a single variable on demand.
- đč An increase in consumers' income can cause the demand curve to shift upward, indicating an increase in demand for a product at every price level.
- đ Non-price determinants of demand include consumer income, tastes or preferences, the number of buyers, prices of related goods, and expectations of future prices.
- đ A demand schedule is a table showing the quantities of a product that would be purchased at various prices, illustrating the relationship between price and quantity demanded.
- đ The demand curve is a graphical representation of the demand schedule, with price on the vertical axis and quantity on the horizontal axis, typically sloping downward from left to right.
- đ Changes in non-price determinants can cause the entire demand curve to shift, either to the right (increase in demand) or to the left (decrease in demand).
- đŒ Income changes can affect the demand for normal goods (demand increases with income) and inferior goods (demand decreases with income) differently.
- đ Substitute goods are those that can be used in place of each other; an increase in the price of one good typically increases the demand for its substitutes.
- đ Complementary goods are used together; a change in the price of one good affects the demand for the other good in the same direction.
Q & A
What is the definition of demand as discussed in the script?
-Demand refers to a consumer's desire to purchase goods and services and their willingness to pay a price for a specific good or service.
How is market demand different from individual demand?
-Market demand is the total demand for a good or service in a market, which is the sum of all individual demands at various price levels over a given period.
What is the law of demand and how does it relate to price and quantity demanded?
-The law of demand states that there is a negative relationship between the price of a good and the quantity demanded; as price increases, quantity demanded decreases, ceteris paribus.
What does the term 'ceteris paribus' mean in the context of economics?
-Ceteris paribus, or 'all other things being equal,' is an assumption in economics that means all other factors are held constant while examining the relationship between two variables.
What causes a demand curve to shift upward?
-An increase in demand, such as an increase in consumers' income, causes the demand curve to shift upward, indicating that consumers would buy more at every price level.
What is the difference between a movement along the demand curve and a shift in the demand curve?
-A movement along the demand curve occurs when there is a change in the quantity demanded at a given price due to a change in price alone. A shift in the demand curve occurs when there is a change in demand due to factors other than price.
How does an increase in income affect the demand for normal goods and inferior goods?
-For normal goods, an increase in income leads to an increase in demand. For inferior goods, an increase in income may lead to a decrease in demand as consumers switch to higher-quality products.
What are the non-price determinants of demand and how do they affect the demand curve?
-Non-price determinants of demand include consumers' income, tastes or preferences, number of buyers, prices of related goods, and expectations of future prices. Changes in these factors can cause the entire demand curve to shift.
How do substitute goods affect the demand for a product when its price changes?
-When the price of a good increases, the demand for its substitute goods also increases, as consumers switch to the cheaper alternatives.
What is the role of complementary goods in the demand for a product?
-Complementary goods are two goods that are often used together. If the price of one good increases, the demand for both the good and its complement decreases.
Why is it important to understand the concept of demand in economics?
-Understanding the concept of demand is important in economics because it helps predict consumer behavior, set prices, and make informed decisions in a market economy.
Outlines
đ Introduction to Market Demand
The video begins by introducing the concept of market demand, aiming to help learners understand the relationship between demand and price, analyze the law of demand, and list the non-price determinants of demand. It poses initial questions to engage viewers, such as defining demand, explaining the law of demand, and identifying factors that shift demand. The answers provided clarify that demand is a relationship between price and quantity, the law of demand indicates a negative relationship between price and quantity, and 'ceteris paribus' means all other things being equal. The video also discusses scenarios that cause demand to shift, emphasizing that an increase in consumer income leads to an upward shift in demand.
đ The Law of Demand and Its Implications
This section delves into the law of demand, explaining how as prices rise, the quantity demanded typically falls, given other factors are constant. It discusses the substitution and income effects that influence consumer behavior when prices change. The concept of a demand schedule and demand curve are introduced, using a hypothetical example of sandwiches to illustrate how changes in price affect the quantity demanded. The video visually represents this relationship, showing how a demand curve slopes downward, indicating the negative correlation between price and quantity demanded. It also explains how non-price factors can shift the demand curve, either to the right (increase in demand) or to the left (decrease in demand).
đŒ Non-Price Determinants of Demand
The video explores various non-price factors that can affect market demand, such as changes in consumer income, tastes or preferences, population size, and expectations about future prices. It differentiates between normal and inferior goods, explaining how demand for normal goods increases with income, while demand for inferior goods decreases. The impact of substitute and complementary goods on demand is also discussed, along with the effects of consumer expectations about future price changes. The video concludes with an activity prompt, encouraging viewers to reflect on the lesson and consider the most important factor influencing their product purchases, emphasizing the significance of understanding these economic principles in everyday decision-making.
đ Conclusion and Post-Test
The final paragraph serves as a conclusion, summarizing the key points covered in the video and providing a post-test for viewers to assess their understanding. It invites learners to answer questions about the concept of demand, the law of demand, and the causes of demand shifts, reinforcing the importance of these economic principles. The video ends with an encouraging note, prompting viewers to reflect on their learning and apply the knowledge gained to real-world scenarios.
Mindmap
Keywords
đĄDemand
đĄLaw of Demand
đĄCeteris Paribus
đĄQuantity Demanded
đĄDemand Schedule
đĄDemand Curve
đĄSubstitution Effect
đĄIncome Effect
đĄNon-Price Determinants of Demand
đĄNormal Goods
đĄInferior Goods
Highlights
The concept of demand and price is introduced as a relationship between the quantity demanded of a product and its price during a given period.
Demand is defined as the consumers' willingness and ability to buy a good or service at a particular price.
The law of demand illustrates a negative relationship between price and quantity demanded, meaning as price increases, quantity demanded decreases, assuming all other factors are constant.
Ceteris paribus is a principle that means all other things being held constant, which is crucial for understanding shifts in demand.
An increase in consumers' income can cause the demand curve to shift upward, indicating an increase in demand.
Price is not the only factor that affects demand; non-price determinants such as income, tastes, and expectations also play a role.
A demand schedule is a table showing the quantities of a product that would be purchased at various prices at a given time and place.
The demand curve is a graphical representation of the demand schedule, with price on the vertical axis and quantity on the horizontal axis.
A downward sloping demand curve reflects the negative relationship between price and quantity demanded as described by the law of demand.
A movement along the demand curve occurs when the price changes, and consumers adjust the quantity they are willing to buy.
Non-price determinants can cause the entire demand curve to shift, indicating a change in demand for all prices.
An increase in demand is shown by a rightward shift of the demand curve, while a decrease in demand is shown by a leftward shift.
Individual income levels can affect demand, with higher income leading to increased demand for normal goods.
Tastes and preferences can influence demand, as consumers may buy more of a product they like more.
The number of buyers in the market can impact demand, with a larger population potentially leading to higher demand.
Substitute goods can affect demand, as an increase in the price of one good may lead to an increase in demand for its substitutes.
Complementary goods are two goods where an increase in the price of one leads to a decrease in demand for both.
Expectations of future prices can cause consumers to change their current buying behavior, potentially leading to shifts in demand.
Economics is defined as the study of human behavior and interactions in a society, particularly in relation to resource allocation and decision-making.
The importance of understanding the relationship between price and consumer buying power is emphasized in the context of a mixed economy.
Transcripts
[Music]
hi everyone for today's topic let us
have market demand
at the end of the lesson the learners
should be able to
understand the concept of demand and
price analyze the law of demand and
enumerate the non-price determinants of
demand before we proceed to our
discussion let us try to answer the
following questions
1. which of the following statements
refers to demand a a relationship
between the price of a product and the
quantity demanded during a given period
b it refers to a quantity of a good or
service consumers would choose to buy at
a particular price
c it shows the number of goods that
consumers are willing and able to buy d
all of the above
the answer is a a relationship between
the price of a product and the quantity
demanded during a given period
2. which of the following statements
does not describe the law of demand
a it shows the relationship between
price and quantity demanded b there is a
negative relationship between price and
quantity demanded c price is directly
affected by quantity demanded d
none of the above
the answer is c price is directly
affected by quantity demanded
3. which of the following is true about
ceteris paribus a it is only focused on
market demand b it refers to factors of
demand shift c it means that all other
things held constant d
none of the above
the answer is c it means that all other
things held constant
4. which of the following scenarios
causes the demand to shift upward a
consumers are satiated with product b
increase in consumers income c the price
is expected to decrease next week d
none of the above
the answer is b increase in consumers
income 5. which of the following factors
does not cause a shift in the demand
curve
a price b the income of consumers c
expectations of future prices d none of
the above
the answer is a price
we let's check if you still remember our
lesson last time enumerate the causes of
unemployment and poverty
economics as per definition it deals
with human behavior and how people
interact with each other in a society
hence it is important to know how
individuals make choices out of the
resources available
in the market and mixed economy we
discussed that individuals are free to
choose whatever they want to buy
there are many factors which signal them
to buy a certain product
however price is the main indicator why
consumers purchase a good or service
today we will discuss the relationship
of the price with the consumer's buying
power
demand is an economic principle
referring to a consumer's desire to
purchase goods and services and a
willingness to pay a price for a
specific good or service
if we are talking about market demand it
is defined as the willingness and
ability of consumers to buy different
quantities of goods or services at any
given time at various possible prices
because of scarcity you cannot get all
what you want even if you have enough
money to pay for a new dress you might
decide not to buy it because it defies
you with an opportunity cost
there's a great opportunity cost as the
price of a product gets higher the less
likely that you will buy
since price influences our buying
decision consumers are hesitant to buy
products at a higher price
price is the amount of money that has to
be paid to acquire a given product
the number of units of a good that
individuals are willing and able to buy
a particular price during a particular
period is called quantity demanded
as price increases cetera's paribus
quantity demanded decreases this
principle is called the law of demand
there is a negative relationship between
price and quantity demanded price and
quantity demanded are regularly observed
to be negatively related for two reasons
substitution effect as the price of a
good increase relative to the price of
the other goods the opportunity cost of
buying that good increases and consumers
will switch to substitutes other goods
that can be used in its place
income effect as the price of a good
rises and income remains the same
consumers who could no longer afford to
buy all the things that they used to buy
would normally buy less of the good
whose price has been increased
demand schedule is a table showing the
quantities of a product that would be
purchased at various prices at a given
time and place
table 1 contains a hypothetical schedule
of the demand for sandwiches in a local
market during school days
the left column shows the various prices
while on the right column shows the
number of units which consumers would
choose to buy at a given price
as observed as the price rises the
quantity demanded declines
demand curve is a graph showing the
quantities of a product that would be
purchased at various prices at a given
time
the market demand curve for sandwiches
is a graphical representation of a
demanding schedule for sandwiches
as shown in figure 1 the price is scaled
on the graph's vertical axis and
quantity on the horizontal axis
each point on the curve shows the number
of sandwiches that consumers would
choose to buy at a particular
in situation a at 30 pesos consumers
would buy 20 sandwiches
situation b represents the combination
of 40 sandwiches at 40 pesos while in
situation seed consumers will buy 60
sandwiches at 20 pesos and so on
when we connect all these points we
obtain the market curve labeled as d
this represents a demand curve
the market demand curve slopes downward
towards the right a downward sloping
demand curve reflects the observed
negative relationship between price and
quantity law of demand
as the price decreases the quantity
demanded increases and vice versa
since the assumption is that price is
the only factor that affects the
quantity demanded for every price change
there is a movement along the demand
curve
when the price of sandwiches falls from
25 pesos to 20 pesos the number of units
demanded by consumers rises from 40 to
60.
there is a movement along the demand
curve from point b to c we have
discussed earlier that price is the only
factor that determines the quantity of a
good or service that consumers choose to
buy
demand can be also affected by other
factors other than price which is known
as non-price determinants
the non-price determinants are income of
consumers hastes or preferences of
consumers number of buyers prices of
related goods and expectations of future
prices when these factors change there
is a shift in the entire demand curve
figure 2 shows the shifts in the market
demand curve that results from a change
in one of the non-price factors
the rightward shift from d1 to d2
implies an increase in demand
consumers would likely buy more
sandwiches at every price for example
they would choose to buy 80 instead of
60 sandwiches at 20 pesos
an increase in demand is an increase in
the number of units that consumers would
choose to buy at every price
the leftward shift from d1 to d3
represents a decrease in demand
consumers would choose to buy less
sandwiches at every price
for example they would choose to buy 40
instead of 60 sandwiches at 20 pesos
a decrease in demand is a decrease in
the number of units that consumers would
choose to buy at each and every price
individual income may change depending
upon the economic situation an increase
in income leads consumers to buy more
goods at every price
a decrease in income leads consumers to
buy fewer goods at every price
there are two types of goods as income
basis normal and inferior goods for
normal goods demand increases as income
increases if the sandwich is a normal
good an increase in income leads to an
increase in demand for sandwiches
for inferior goods demand decreases as
income increases an increase in income
may lead some consumers to buy less
sandwiches because they can now afford
to buy other better products like
hamburgers or pizza
an increase in the likeness of the
people place on sandwiches would lead
them to buy more sandwiches at every
price
when people become more aggressive to
try new snacks some of the consumers
might choose to buy fewer hamburgers at
each and every price
as the population gets bigger the demand
also increases metro manila has a
greater demand because there are many
consumers compared to other provinces
substitute goods as the price of a good
increase the demand for that good
decreases and its substitute good will
increase
sandwiches and hamburgers are substitute
goods if the price of sandwiches
increases consumer leads to buy fewer
sandwiches and buys more hamburgers
complementary goods as the price of a
good increase the demand for that good
decreases and the complementary good
also
decreases sandwiches and drinks are
complementary goods if the price of
sandwiches increases the demand for
sandwiches decreases and so with the
drinks
if people expect the price of sandwiches
to rise next week consumers may buy more
hamburgers now and consume fewer later
on if people expect the price of a
sandwich to fall next week
they may buy fewer sandwiches now and
buy more later on
for your activity please read the
directions you may answer this after
watching the video
to summarize what you have learned in
the lesson answer the following
questions
1. what is demand 2. what is the law of
demand 3. what are the causes of demand
shifts
for you what is the most important
factor to consider when buying a product
why explain your answer
let us check if you have learned
something today please answer the post
test
[Music]
you
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