MICROECONOMICS

GROUP 04

Chapter 2:
THINKING LIKE A ECONOMIST

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ABOUT US:
Nguyen Thi Lan – Leader
Pham Thuy Trang
Tran Kieu Linh
Hoang Viet Huong
Hua Thao Huong
Pham Anh Tu
Le Thi Thu Thuy

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 1 . Quantity demanded; law of demand

I. • Quantity demanded
- The total amount of a good or service that consumers

DEMAND
are willing and able to buy over a given interval of
time. 
- Depends on the price of a good or service in a
marketplace.
• Law of demand
- The price of a product and the quantity demanded for
that product have an inverse relationship.
- A higher price results in a lower quantity demanded
and a lower price results in higher quantity demanded.

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2. Two ways to illustrate demand

and supply

• Demand schedule
- Demand schedule is a table that shows the relationship
between the price of a good and the quantity demanded
- Holding constant everything else that influences how much of
good consumers want to buy
Example: America’s demand for pizza

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2. Two ways to illustrate demand and supply

• Demand curve
- Demand curve is a graph of the relationship between the
price of a good and the quantity demanded
- illustrates the law of demand
- The price is on the vertical axis and the quantity is on the
horizontal axis.

Example: America’s demand for pizza

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3. Determine market demand from individual demand

- Sum of all individual demands for a good or service.
- Market demand curve: sum of the individual demand curves horizontally

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4. Difference between movement along the demand curve and

demand curve shifts
movement along the demand curve demand curve shifts

- the demand curve shows how price affects
quantity demanded, other things being equal
 - “other things” here includes non-price
determinants of demand.  
 → price cause the movement along the
demand curve, it changes in the quantity
demanded
- changes in non-price determinants of
demand cause a shift in the demand curve 
    → change in demand
- any change that increases the quantity
demanded at any prices shifts the demand
curve to the right.
    → an increase in demand

- any change that decreases the quantity

demanded at any prices shifts the demand
e.g: an increase in price decreases the
curve to the left. 
quantity of milk demanded.
    → a decrease in demand

e.g: 

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5. Which factors change the demand then
shift the demand curve

• The demand curve shifts

- The demand curve shows how price affects quantity demanded
(price causes the movement along the Demand curve), other
things being equal.
- These “other things” are non-price determinants of demand (i.e.,
things that determine buyers’ demand for a good, other than the
good’s price).
- Changes in them shift the D curve...

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5. Which factors change the demand
then shift the demand curve

• Factors shift the D curve • Shifts in the demand curve are

– Any change that increases the quantity caused by changes in:
demanded at any price shifts the demand curve – Number of buyers
to the right and is called an increase in – Income
demand. – Prices of related goods
– Any change that decreases the quantity – Tastes
demanded at any price shifts the demand curve – Expectations
to the left and is called a decrease in demand.

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• Example

Draw a demand curve for music downloads. What happens

to it in each of the following scenarios? Why?
A. The price of iPods falls
B. The price of music downloads falls
C. The price of CDs falls

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 A. The price of B. The price of music C. The price
iPods falls downloads falls of CDs falls

Music downloads and iPods are
complements.
A fall in the price of iPods shifts
the demand curve for music
downloads to the right.
The D curve does not shift. CDs and music downloads are
Move down along the curve to a substitutes.
point with lo  A fall in the price of CDs shifts
wer P, higher Q. demands for music downloads to
the left.

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