Economics (Pre-Masters)

Week 1 Lessons & Activities: Theory of

Demand & Consumer Behaviour (1)
Learning outcomes
By the end of this week, you will be able to:

- Explain the ‘theory of demand and consumer behaviour’ and discuss their
application in examining business and economic issues.

- Discuss the limitations of the theory of demand and consumer behaviour

- Apply problem solving skills and use appropriate data to analyse and
critically evaluate demand for products and services.

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Topics covered this week!
• 1) Theory of Demand
• 2) Elasticity of Demand
• 3) Consumer Behaviour

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 Slideshare Resources
- Theory of Demand
• https://www.slideshare.net/hellogarg/theory-of-
demand-84625086

• https://www.slideshare.net/anj134u/ch-
3demandtheory

• https://www.slideshare.net/deepakgautam0071/theor
y-of-demand-28578292

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Instructions for this week’s activities
• Instruction(s):
• Complete activities for each of the sessions as per
slides below. At the end of the week, you should put
all your answers together in one document and
upload on the drop-in box for the week on
Studysmart. This should exclude answers to the
independent activities.
• Any uncompleted class work should be taken as
homework.
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Lecture 1 Activities: Demand and Elasticity
of Demand
•Question 1: In one sentence state the key
difference between the concepts ‘change in
quantity demanded’ and ‘change in demand’.
•Question 2: State the determinants of demand
•Question 3: Write the definition for ‘elasticity
of demand’ and state the general formula for
calculating elasticity of demand.

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Definition/Meaning of Demand

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Definition/Meaning of Demand

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Individual and market demand: schedules/graphs

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Individual and market demand: schedules/graphs

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Individual and market demand: schedules/graphs

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Law of Demand; definition, schedule, graph

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Law of Demand; definition, schedule, graph

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Law of Demand; definition, schedule, graph

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Law of Demand; definition, schedule, graph

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Components of demand

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Components of demand

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Exceptions to the law of demand
Change in demand vs change in quantity
demanded; movements and shifts

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The slope of demand curve

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Determinants of demand

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Abnormal demand curve

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Resources on Elasticity of Demand

https://www.slideshare.net/ujjmishra1/elasticity-of-
demand-28840573

https://www.slideshare.net/harshalvyas/elasticity-of-
demandppt-2932407

https://www.slideshare.net/gracewithfire/elasticity-
26614546

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Determinants of price elasticity of demand

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Measuring elasticity - methods

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Importance of elasticity

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Lecture 2 Activities: Consumer Behaviour

Discuss in groups and find answers to the following as

allocated:
(1)Explain the following, with the aid of a graph where
appropriate:
(i)Marginal utility analysis and the law of diminishing
marginal utility (Group 1)
(ii)Budget line and Consumer equilibrium (Group 2)
(iii)Diminishing marginal rate of substitution (Group 3)
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Lecture 2 Activities: Consumer Behaviour
(1)Explain the importance of the law of diminishing
marginal utility to:
(i)a consumer (Group 1))
(ii)a government, (Group 2)
(iii)a manufacturer. (Group 3)

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Seminar Activities:
(a)State the law of demand and demonstrate it using a diagram.
First, create a schedule to use in drawing the diagram.
(Individual work)

(b)Case Study:
• You work for a management firm that has been approached by
Mr BB, a sole trader, who is considering raising the price of one
of his products. Mr BB has not given any information about the
nature of the product or the price that he charges or intends to
charge. He has requested a meeting with the firm for a briefing
about what he can do. The managing director of your firm has
asked you to prepare notes to be used to advise Mr BB during
the meeting.
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Seminar Activities:
Required: Working in groups:
From your knowledge in theory of demand and
elasticity:
(i)Identify and explain all the issues that you need to
consider to be able to provide proper and adequate
advice to Mr BB.
(ii)Create illustrations to explain and support your key
points.
(iii)Make your presentation using PowerPoints.
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Tutorial

(a) State the ‘Louden and Bitta’ definition of consumer

behaviour
(b) Applying concepts of the theory of consumer
behaviour, including the use of indifference curves,
utility analysis, budget line, substitution effect, and
consumer equilibrium, evaluate your decision to
enrol at ISC Coventry University London for your PMP
course.

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Independent study activities:
Complete the following activities on your own. It is NOT
to be submitted as part of the week’s activities.
Question 1:
(a)Use graphs to illustrate the difference between
‘change in quantity demanded’ and ‘change in
demand’.
(b)State three types of elasticity of demand
(c)Distinguish between inelastic demand, elastic
demand, and unitary elastic demand using price
elasticity.
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Independent study activities:
Question 1 (continued):
(d) Describe inelastic demand, elastic demand, and
unitary elastic demand by their co-efficient values.
(e) Explain why some products and services have
inelastic demand, elastic demand, and unitary elastic
demand.
(f) State three determinants of price elasticity of
demand
(g) How is the concept of elasticity relevant to business
firms? 67
Independent study activities:
Question 2: Application of theories/concepts in decision making
(a) Draw diagrams to show, and explain, the effect of price
change (increase/decrease) on total revenue for
products/services that are:
i) Elastic

ii) Inelastic

iii)Unitary elastic
(b) Discuss to what extent governments, households and
businesses may employ the concepts of demand, elasticity of
demand and consumer behaviour in making important decisions.

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