How much are consumers willing to pay? (demand)


Two Class Periods


Law of Demand
Demand Curve
Determinants of Demand
Shift in Demand


Students will:


Although the primary objective in running a business is to earn a profit, this is impossible if no one wants to buy the product being offered for sale. Entrepreneurs need to know how many products they will be able to sell at various prices in the market they serve. They also must be aware of factors that have the potential of changing demand for their products. Finally, they need to understand the impact that changes in price would have on the number of products they can sell. Without a basic knowledge of these market forces, entrepreneurs are less likely to succeed in earning a profit.



Demand the schedule of how much consumers are willing and able to buy at all possible prices in a given period of time.
Law of Demand everything else being equal, more products will be demanded at a l ower price than at a higher price.
Determinants of Demand factors (incomes, tastes, and preferences, the prices of substitute or complementary products, expectations for the future) that cause the demand for a product to change.
Demand Curve a graphical representation that shows the number of products that will be demanded at various prices; a graphical representation that shows the relationship between different prices for a product and how much of it people will be willing to buy at each price.
Shift in Demand an increase or decrease in demand that results from a change in a determinant of demand for a product.



  1. Distribute a copy of Activity 31 to each student. Ask them to read Part A and to complete the table.
  2. Tabulate your students' answers on the board as follows
Price Total number of "Kookies" students in this class would buy
.20 each
.40 each
.60 each
.80 each
1.00 each


  1. Discuss the meaning of the terms demand and the law of demand with them.
  2. Plot a demand curve on the board based on the data collected from your students. Have each student do the same on Part B of the activity. Point out how the law of demand is demonstrated by their graphs (the number of "Kookies" that would be demanded at a low price is greater than that which would be demanded at a higher price).
  3. Ask your students what would happen to the number of "Kookies" they would buy at each price as the result of each of the following events:
    • their weekly income went up $20
    • their girlfriend or boyfriend developed a mad craving for "Kookies"
    • the drugstore down the street had a sale on candy bars at 10 cents each
    • they heard the price of "Kookies" was going up 25 cents next week
  4. Explain that the factors they considered in procedure 5 above are called determinants of demand by economists. When these things change, the number of items people are willing to buy at each price also changes. The determinants of demand demonstrated above are: income, tastes and preferences, the price of substitute goods, and expectations of the future.
  5. Explain that each of the situations in procedure 5 above would cause the demand curve to move either to the left (showing a decrease in demand), or to the right (showing an increase in demand). Sketch a new demand curve on your original graph of demand for each situation and explain each shift in demand to your students. If needed, demonstrate the shifts by repeating procedures 2 and 4. New demand curve:
    • an increase in income would cause the demand curve to shift to the right (income)
    • an increase in your girlfriend's or boyfriend's desire for "Kookies" would cause your demand curve to shift to the right assuming you bought more for your friend (tastes and preferences)
    • a sale on candy bars would cause the demand curve to shift to the left because many people would substitute candy for "Kookies" (the price of substitutes) the expectation of a future price increase would cause today's demand curve to shift to the right as customers stock up on "Kookies" before the price goes up (expectations of the future)



Evaluate the lesson using either Activity 33 or Activity 34.


Used with permission. Master Curriculum Guide: Economics and Entrepreneurship, copyright © 1991,National Council on Economic Education, New York, NY. All rights reserved.For more information visit www.ncee.net or call 1-800-338-1192.

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