AP Macroeconomics AMSCO Guided Notes
1.4: Demand
AP Macroeconomics Guided Notes
AMSCO 1.4 - Demand
Essential Questions
- What effect does the price of a good or service have on consumer demand?
I. The Law of Demand
1. What is demand and what does the law of demand describe?
2. What is the inverse relationship between price and quantity demanded, and why does it occur?
II. Determinants of Demand
1. What are determinants of demand and how do they differ from price changes?
A. Change in Disposable Income
1. How does a change in disposable income affect demand for goods and services?
2. Why might demand for some goods increase when consumer income falls?
B. Change in Availability of Related Goods or Services
1. What are substitute goods and how does a price change in one affect demand for the other?
2. What are complementary goods and how did the 1970s oil crisis demonstrate their relationship?
C. Change in Tastes or Preferences
1. How can advertising influence consumer tastes and preferences for a product?
D. Change in Expectations About the Future
1. How do consumer expectations about future prices affect current demand?
E. Change in Number of Buyers in the Market
1. How does an increase or decrease in the number of buyers affect market demand?
F. Other Factors Influencing Demand
1. What are examples of short-term factors that can influence demand for goods?
III. Graphing Demand
A. Demand Schedule
1. What is a demand schedule and what two columns does it typically contain?
B. Demand Curve
1. How is a demand curve created from a demand schedule and what does its downward slope represent?
C. Shifting the Demand Curve
1. What causes a demand curve to shift, and how do increases and decreases in demand appear on a graph?
2. Why does a change in price move along the demand curve rather than shift the curve?
D. Slope of the Demand Curve
1. What is price elasticity of demand and how does it affect the slope of the demand curve?
2. Why do goods perceived as hard to replace have steeper demand curves than goods perceived as easy to replace?
Key Terms
demand
law of demand
determinants of demand
substitute
complementary
demand curve