If the price of pizza goes up, what
happens to the demand for pizza?
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
NOTHING! Nothing
happens to the demand for pizza if the price
changes!
The next three lessons introduce the
demand and supply model for explaining how prices arise and
change in a market economy. Learn these lessons well. Do the
assigned problems. Draw the graphs in the Yellow Pages and
while you are reading and studying. DRAW GRAPHS! Get used to
using the graphs to help you answer questions. If you are
avoiding drawing the graphs you will do poorly and not get
the practice that you need to learn the concept.
So why doesn't the demand for pizza
change if the price changes? Because economists have a
different definition of "demand". Demand is NOT the quantity
that we buy. If the price of pizza goes up we will buy less,
but that is not what "demand" means in economics.
Economists tend to be precise with
their definitions and sometimes their definitions are
different than the more commonly used definitions. Things
like "scarcity", "investment", "cost", "demand", and
"supply", have different definitions in economics than what
you may already know. Learn our definitions! Demand
is not how much we buy. Demand has a different definition in
economics. "Demand" means the "demand graph".
Economists use models (like the
supply and demand model) to simplify the real world. They do
this by isolating certain variables from all the clutter
found in reality. Then by changing one variable at a time
economists can see what effect it will have.
In this lesson we will learn the
economic definition of DEMAND and plot the demand graph.
Then, we will look at one variable at a time to see what
effect they have on the demand curve. We call these
variables the "non-price determinants of demand". They are:
Pe, Pog, I, Npot, T or "PPINT". LEARN THEM! LEARN THEM WELL!
Know how each one affects the demand curve. Be sure to do
the Yellow Pages and other Practice Activities until you
understand the concept well.
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