Unit 2
Prices and Markets
Chapter 4: Demand
Chapter Overviews
Section 1: What Is Demand?
Demand is easy to understand because it involves only two variables—the price and quantity of a specific product at a given point in time. Demand does not always stay the same and can be determined by a demand schedule, which shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time. The Law of Demand states that when the price of something goes up, the quantity demanded goes down, and vice versa.
Section 2: Factors Affecting Demand
Only a change in price can cause a change in quantity demanded. When the price goes up, less is demanded; when the price goes down, more is demanded. The following factors affect demand: the income effect and the substitution effect. Furthermore, demand can change because of changes in the determinants of demand: consumer income, consumer tastes, the price of related goods, expectations, and the number of consumers.
Section 3: Elasticity of Demand
Elasticity is a general measure of responsiveness— an important cause-and-effect relationship in economics. There are three different forms of elasticity: elastic demand, inelastic demand, and unit elastic demand. To estimate elasticity, it is useful to look at the impact of a price change on total expenditures, or the amount that consumers spend on a product at a particular price. This is sometimes called the total expenditures test. The answers to three questions help determine a product's demand elasticity. Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income?
Student Web Activity
Cf. http://glencoe.mcgraw-hill.com/sites/007879997x/student_view0/unit2/chapter4/student_web_activities.html
Self-Check Quizzes
Cf. http://glencoe.mcgraw-hill.com/sites/007879997x/student_view0/unit2/chapter4/self-check_quizzes.html
Crossword Game
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_12/ch04/index.html
Vocabulary eFlashcards
Cf. http://www.glencoe.com/qe/efcsec.php?qi=21822
In-Motion Animations
Individual and Market Demand Curves
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p94.swf
Change in Demand
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p99.swf
Figure 4.2 Individual and Market Demand Curves
Supply and Demand Screen shot 1
Why It Matters
The Big Idea
Section 1 What is Demand?
The demand for a good or service is defined to be the relationship that exists between the price of the good and the quantity demanded in a given time period, ceteris paribus (other things being equal).
Guide to Reading
Section Preview
Content Vocabulary
demand
microeconomics
market economy
demand schedule
demand curve
Deriving the Demand Curve, 2:09
Law of Demand
Introduction to the law of demand, and what it means, 4:44
market demand curve
marginal utility
diminishing marginal utility
Diminishing Marginal Utility, 4:15
Academic Vocabulary
prevail
inversely
Reading Strategy
Products in the News
Wrist Watch
An Introduction to Demand
Main Idea
Economics and You
Demand Illustrated
The Individual Demand Schedule
The Individual Demand Curve
Reading Check
Interpreting
How do you react to a change in the price of an item? How does this illustrate the concept of demand?
The Law of Demand
Main Idea
Economics and You
Why We Call It a "Law"
The Market Demand Curve
Reading Check
Explaining
How does the market demand curve reflect the Law of Demand?
Demand and Marginal Utility
Main Idea
Economics and You
Reading Check
Describing
How does the principle of diminishing marginal utility explain the price we pay for another unit of a good or service?
Review