ILO
a) The distinction between movements along a demand curve and shifts of a demand curve
b) The factors that may cause a shift in the demand curve (the conditions of demand)
c) The concept of diminishing marginal utility and how this influences the shape of the demand curve
a) The distinction between movements along a demand curve and shifts of a demand curve
b) The factors that may cause a shift in the demand curve (the conditions of demand)
c) The concept of diminishing marginal utility and how this influences the shape of the demand curve
Demand curve
A demand curve shows this relationship between price and quantity demanded.
Quantity on the x axis Price on the y axis 1. Draw a curve that represents your demand for tea. 2. How would you describe the relationship? 3. Why do you think it takes this shape? 4. Is it perfectly straight? 5. What does the gradient mean? |
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Why do firms and Governments need to understand demand curves?
The science behind airfare pricing
Shifts in Demand
If price causes a movement along a demand curve what will cause it to shift. Each factor begins with the following letter:
P
A
S
I
F
I
C
P
A
S
I
F
I
C
Additional practice:
Movement along or shift
Movement along or shift
Concept Diminishing Utility
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Assess how an all you can eat buffet does not lose money? (10 marks)
Man Banned from an All-You-Can-Eat Buffet for Eating Too Much!
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What others goods and services can use this concept with pricing?
Merlin Annual Pass TV advert
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The Theory
Marginal utility is the additional utility (satisfaction), gained from each additional unit of consumption.
Total utility will normally rise as additional units of a product are consumed.
However marginal utility will usually decrease with each additional increase in the consumption of a good.
This decrease in marginal utility demonstrates the law of diminishing marginal utility, which helps economists to understand the negative sloping demand curve.
Total utility will normally rise as additional units of a product are consumed.
However marginal utility will usually decrease with each additional increase in the consumption of a good.
This decrease in marginal utility demonstrates the law of diminishing marginal utility, which helps economists to understand the negative sloping demand curve.