02. Demand.ppt - Getting an idea of what demand is The demand for chocolate bars experiment In my shop I have 4 items Getting an idea of what demand is

# 02. Demand.ppt - Getting an idea of what demand is The...

• 30

This preview shows page 1 - 9 out of 30 pages.

+ Getting an idea of what demand is The demand for chocolate bars experiment In my shop I have 4 items
Product Quantities Can of coke (€1) Snickers bar (€1) Litre of milk (€1) Mars bar (€1) Getting an idea of what demand is Stage 1 Each item is €1 You have €5 income to spend and must spend it all You can buy any number of each product and do not have to buy all of the products When you have made your decision draw a table like the one below and fill it out
+ Stage 2 It s a new day and you have consumed everything that you bought yesterday A global shortage of peanuts has put the price up of a snickers bar to €2
Product Quantities Can of coke (€1) Snickers bar (€2) Litre of milk (€1) Mars bar (€1) Demand for chocolate bars experiment cont… Stage 2 It’s a new day and you have consumed everything that you bought yesterday A global shortage of peanuts has put the price up of a snickers bar to €2 You still have €5 income to spend and must spend it all You can buy any number of one product and do not have to buy all of the products When you have made your decision draw a table like the one below again and fill it out with your new preferences
Demand for chocolate bars experiment continued Stage 3 – calculating market demand Organise yourself into 2 groups Work out the market quantities for your group for stages 1 and 2. Do this by adding together the quantities for each product at each price level demanded by each person in your group. See an example below Product Quantities - Stage 1 (Snickers cost €1) Quantities - Stage 2 (Snickers cost €2) Can of coke ||||| ||||| |||| 14 ||||| |||| 9 Snickers bar ||||| ||||| ||| 13 |||| 4 Litre of milk ||||| ||||| || 12 ||| 3 Mars bar ||||| ||||| ||||| |||| 19 ||||| ||||| |||| 14 What this represents is the demand for each product – the amount each person would like to purchase at the price stated. By adding together each individual’ s demand we get the market demand Make your team a table like the one above and complete it
Demand for chocolate bars experiment continued Stage 3 – calculating market demand Now lets represent this information in the form of a graph Use the graph paper provided Price goes on the vertical axis Quantity demanded goes on the horizontal axis Plot the quantity demanded of snickers bars for your group against the price (see the example below) You will see two points on the graph – one for the quantity demanded at €1 and another for the quantity demanded at €2 Draw these two points and draw a straight line through them like below €2 €1.5 0 €1 €0.5 0