Understanding the Law of Demand: Prices and Quantities

Economics Grades High School 8:16 Video
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Lesson Description

Explore the fundamental economic principle of the law of demand, examining the inverse relationship between price and quantity demanded through real-world examples and graphical representations.

Video Resource

Law of demand | Supply, demand, and market equilibrium | Microeconomics | Khan Academy

Khan Academy

Duration: 8:16
Watch on YouTube

Key Concepts

  • Law of Demand
  • Quantity Demanded
  • Demand Schedule
  • Demand Curve
  • Ceteris Paribus

Learning Objectives

  • Define the law of demand and explain its inverse relationship between price and quantity demanded.
  • Differentiate between 'demand' and 'quantity demanded'.
  • Interpret and create a demand schedule.
  • Construct a demand curve from a demand schedule.
  • Apply the concept of 'ceteris paribus' in the context of demand.

Educator Instructions

  • Introduction (5 mins)
    Begin by introducing the concept of the law of demand and its relevance in understanding consumer behavior. Briefly discuss real-world examples of how price affects purchasing decisions.
  • Video Viewing (10 mins)
    Play the Khan Academy video "Law of demand | Supply, demand, and market equilibrium | Microeconomics | Khan Academy." Instruct students to take notes on key terms and examples.
  • Defining Key Terms (10 mins)
    Discuss the difference between 'demand' and 'quantity demanded.' Emphasize that 'demand' refers to the entire relationship between price and quantity, while 'quantity demanded' is a specific amount at a specific price, assuming ceteris paribus. Define 'ceteris paribus' and its importance in economic models.
  • Demand Schedule and Curve (15 mins)
    Explain how a demand schedule is a table that shows the relationship between price and quantity demanded. Guide students in creating their own demand schedule based on a hypothetical product. Then, demonstrate how to plot a demand curve using the data from the demand schedule. Explain why economists put price on the Y-axis, even though it's often the independent variable. Have students create their own demand curve.
  • Activity: Shifting Demand (10 mins)
    Lead a discussion on factors that could cause the entire demand curve to shift (e.g., changes in income, tastes, expectations). This prepares for future lessons but introduces the idea that demand isn't static.
  • Wrap-up and Review (5 mins)
    Summarize the key concepts of the law of demand, demand schedules, and demand curves. Address any remaining questions. Preview the next lesson on factors that shift the demand curve.

Interactive Exercises

  • Create a Demand Schedule and Curve
    Students choose a product and create a demand schedule with at least five price points and corresponding quantities demanded. They then plot the data on a graph to create a demand curve. Students can share their schedules and curves with the class.

Discussion Questions

  • Can you think of a time when you changed your purchasing behavior based on the price of a product? Explain.
  • Why is it important to hold 'all else equal' (ceteris paribus) when analyzing the relationship between price and quantity demanded?
  • How might a company use a demand schedule to make decisions about pricing their products?

Skills Developed

  • Critical Thinking
  • Data Analysis
  • Graphing
  • Economic Reasoning

Multiple Choice Questions

Question 1:

According to the law of demand, what happens to the quantity demanded of a product when its price increases?

Correct Answer: It decreases

Question 2:

What does 'ceteris paribus' mean in the context of the law of demand?

Correct Answer: All things being equal

Question 3:

Which of the following best describes a demand schedule?

Correct Answer: A table showing the relationship between price and quantity demanded

Question 4:

On a typical demand curve, which axis represents the price?

Correct Answer: Vertical (y-axis)

Question 5:

What is the difference between 'demand' and 'quantity demanded'?

Correct Answer: 'Demand' is the entire curve, 'quantity demanded' is a point on the curve

Question 6:

An increase in the price of gasoline would likely lead to which of the following?

Correct Answer: A decrease in the quantity demanded of gasoline

Question 7:

If the price of a popular video game decreases from $60 to $30, what is likely to happen to the quantity demanded?

Correct Answer: It will increase

Question 8:

Which of the following is NOT held constant when analyzing a demand curve?

Correct Answer: Price of the good itself

Question 9:

What does a movement *along* the demand curve represent?

Correct Answer: A change in quantity demanded

Question 10:

Which of the following scenarios best illustrates the law of demand?

Correct Answer: A store decreases the price of a product and sells more units

Fill in the Blank Questions

Question 1:

The law of demand states that as price increases, quantity demanded ________.

Correct Answer: decreases

Question 2:

A ________ is a table showing the relationship between price and quantity demanded.

Correct Answer: demand schedule

Question 3:

A ________ is a graph representing the relationship between price and quantity demanded.

Correct Answer: demand curve

Question 4:

The Latin phrase ________ means 'all other things being equal'.

Correct Answer: ceteris paribus

Question 5:

________ refers to the entire relationship between price and quantity demanded, while ________ refers to a specific amount at a specific price.

Correct Answer: Demand

Question 6:

According to the law of demand, there is a(n) ________ relationship between price and quantity demanded.

Correct Answer: inverse

Question 7:

If a product's price increases, consumers will typically buy ________ of it.

Correct Answer: less

Question 8:

Holding all other factors constant, a decrease in price leads to a(n) ________ in quantity demanded.

Correct Answer: increase

Question 9:

The demand curve typically slopes ________, illustrating the law of demand.

Correct Answer: downward

Question 10:

Changes in price cause a ________ *along* the demand curve, not a shift *of* the demand curve.

Correct Answer: movement

Educational Standards

SOC.9-12.E.3.1:Analyze how price and non-price factors affect the demand and supply of goods and services available in the marketplace. SOC.9-12.E.1.1:Define and apply basic economic concepts of money supply, scarcity, surplus, choice, opportunity cost, cost/benefit analysis, risk/reward relationship, incentive, disincentive, and trade-off to a variety of economic situations. SOC.9-12.E.3:Explain how prices are set in a market economy and will determine how price provides incentives to buyers and sellers.

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