Week 3 — Lecture Outline · Demand

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 2 — demand, supply & market equilibrium; comparative statics · SLO A & B
Meeting pattern: two 75-min sessions (≈150 min). Segment minutes below total ~150 — scale to your room.

The deck (E), the tutorial (C), and the workshop (P) all teach from this outline. Every number here is pre-computed and independently verified.

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Week at a glance

Big question	What determines how much of something people buy — and what happens to that relationship when the world changes?
By week's end students can	(1) state the law of demand; (2) read a demand schedule and plot a demand curve; (3) distinguish movement along from a shift; (4) name and apply all six determinants; (5) classify normal/inferior and substitute/complement.
Key vocabulary	demand, law of demand, demand schedule, demand curve, quantity demanded, movement along, shift of the demand curve, determinants of demand, normal good, inferior good, substitute, complement, expectations
Materials	whiteboard; the Week-3 readings/links; Desmos or a spreadsheet; an approved chatbot
Timing note	8 segments ≈ 150 min across two sessions.

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Segment 1 — HOOK: "Why does Uber surge?" (10 min)

Open with a scenario: it's 11 p.m. on a Friday and Uber's price just jumped from $12 to $30 for the same trip. Show of hands — who has put the phone down and decided to wait? Nearly everyone. The hook: buyers respond to prices, and economists can make that response precise. This week we build the model that shows exactly how.

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Segment 2 — PLAIN-LANGUAGE IDEA: the law of demand (12 min)

Teach it in one sentence first:

The law of demand: as the price of a good rises (all else equal), the quantity demanded falls; as price falls, quantity demanded rises.

The intuition: higher prices make a good less attractive relative to alternatives. Two reasons: the substitution effect (the good is now more expensive compared to alternatives, so buyers switch) and the income effect (a higher price eats more of a budget, leaving less purchasing power). Keep it plain: "when coffee costs more, some people switch to tea or make it at home."

Two critical definitions:
- Demand — the entire price-quantity relationship (the schedule or curve).
- Quantity demanded — the specific amount buyers want at one particular price.

The trap to name right now: "demand went down because the price went up" — that is a movement along the demand curve, not a change in demand itself. We'll develop this distinction fully in Segment 5.

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Segment 3 — WORKED EXAMPLE: reading a demand schedule (15 min)

Write on the board; do every row out loud.

The week's model: Qd = 120 − 10P

Price (P)	Quantity Demanded (Qd)
$2	100
$4	80
$6	60
$8	40

✅ VERIFIED NUMBERS (pre-computed; do not recompute live)

• P=2: Qd = 120 − 10(2) = 100. ✓
• P=4: Qd = 120 − 10(4) = 80. ✓
• P=6: Qd = 120 − 10(6) = 60. ✓
• P=8: Qd = 120 − 10(8) = 40. ✓
• Inverse form: P = 12 − 0.1Q. Check: Q=80 → P = 12 − 0.1(80) = 4. ✓

Walk through each row: "at a price of $4, buyers want 80 units — that's the quantity demanded." Then plot four points in Desmos and connect them into a downward-sloping curve. The negative slope is the law of demand made visible.

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Segment 4 — THE DEMAND CURVE as a graph (18 min)

Price on the vertical axis, quantity on the horizontal (the convention every economist uses). The downward slope is the law of demand — higher price → lower quantity demanded. Ask: "What's the y-intercept?" At P=12 (from the inverse form P = 12 − 0.1Q), Qd = 0 — no one buys at $12. At P=0, Qd = 120. These two intercepts define the line.

What makes the curve steep vs. flat? (Plant the seed for Week 5 elasticity.) A steep demand curve means buyers don't adjust much when price changes; a flat one means they adjust a lot. Critical: steepness ≠ the only thing that matters — a shorter curve is NOT "less responsive." We'll formalize this with elasticity in Week 5.

Point on the curve vs. shift of the curve: slide a finger along the curve (P changes, Q changes — that's a movement) versus imagine the whole line moving left or right (that's a shift). Draw both motions on the board.

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Segment 5 — MOVEMENT ALONG vs. SHIFT: the central distinction (22 min)

This is the most-tested concept in demand theory. Spend real time here.

Movement along the demand curve: caused ONLY by a change in the good's own price. Everything else held constant (ceteris paribus). On the graph: you slide from one point to another along the same curve.

Shift of the demand curve: caused by a change in a determinant (anything other than the good's own price). On the graph: the entire curve moves to a new position.

THE SIX DETERMINANTS — each one shifts demand:

Determinant	Increase → demand shifts	Decrease → demand shifts
1. Income (normal good)	RIGHT (↑D)	LEFT (↓D)
1. Income (inferior good)	LEFT (↓D)	RIGHT (↑D)
2. Price of a substitute	RIGHT (↑D)	LEFT (↓D)
3. Price of a complement	LEFT (↓D)	RIGHT (↑D)
4. Tastes/preferences	RIGHT if more popular	LEFT if less popular
5. Expectations (price will ↑)	RIGHT (buy more now)	LEFT (buy less now)
6. Number of buyers	RIGHT	LEFT

Memory device: "T-I-P-S-E-N" — Tastes, Income, Price of related goods, Size of market (buyers), Expectations, Number of buyers.

Drill the classic errors:
- "Coffee prices rose, so demand for coffee fell." → WRONG terminology. Demand (the curve) didn't change — the quantity demanded fell. Call it a movement along.
- "People started preferring oat milk over cow's milk, so demand for cow's milk shifted left." → Correct. Tastes changed → a shift.
- "Coffee prices rose, so demand for tea shifted right." → Correct. Price of a substitute changed → a shift of demand for tea.

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Segment 6 — NORMAL vs. INFERIOR; SUBSTITUTE vs. COMPLEMENT (18 min)

Normal good: when income rises, demand rises. (Most goods: restaurant meals, new clothes, cars.) Income and demand move in the same direction.

Inferior good: when income rises, demand falls. (Bus rides when you can now afford a car; ramen noodles when income is higher.) Income and demand move in opposite directions.

Substitutes: two goods where a rise in the price of one increases demand for the other. (Coffee and tea; Lyft and Uber; a store-brand and a name-brand.)

Complements: two goods where a rise in the price of one decreases demand for the other. (Hot dogs and hot dog buns; streaming service and a new TV; gasoline and SUVs.)

Quick classroom interaction: pair students to classify three pairs: (1) Uber and Lyft; (2) popcorn and movies at the theater; (3) bus rides and income falling. (Answers: substitutes; complements; bus rides likely an inferior good — demand for them rises when income falls.)

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Segment 7 — TECHNOLOGY WORKFLOW + AI-CRITIQUE (20 min)

Live Desmos demo: type y = 12 - 0.1x (the inverse demand P = 12 − 0.1Q, with y=P and x=Q). Read off Q at P=4 (Q=80) and P=6 (Q=60) by dragging the trace.

AI-critique moment: ask an approved chatbot: "If the price of coffee rises, does demand for coffee shift left?" Correct answer: No — the price of coffee's own change causes a movement along the demand curve, not a shift. Chatbots frequently confuse movement along with a shift and will say "demand falls" when they mean "quantity demanded falls." Have students catch the error.

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Segment 8 — CALLBACKS, TEASE & THE WEEK'S WORK (10 min — second session close)**

• Callback to Week 1 & 2: demand is a model — like the PPF, it simplifies reality. Ceteris paribus is the economist's "holding everything else constant" so we can isolate one relationship at a time.
• Tease Week 4: "Next week we build the other side — supply — and find where the two curves cross. That crossing point, the equilibrium, is where markets settle, and every news story about prices is really about what's shifting which curve."
• The week's work: Lecture Tutorial, Practice, Quiz 3, Discussion 3, Assignment 3, and Workshop 3.

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Instructor FAQ — common stumbles

• "Demand fell because prices fell" (mixing up direction). No — lower prices raise quantity demanded (movement along), they don't cause demand to fall. The direction of the law of demand goes: ↑P → ↓Qd, ↓P → ↑Qd.
• "What's the difference between demand and quantity demanded?" Demand = the whole schedule/curve. Quantity demanded = a single point on that curve at one price.
• "How do I know which way the shift goes?" Ask: does the determinant make buyers want MORE or LESS at any given price? More → right shift. Less → left shift.
• "Why is price on the vertical axis?" Historical convention (Alfred Marshall). It can feel backwards if you think of P as the independent variable. Just accept the convention and remember: on a demand curve, moving UP the vertical axis means higher price → lower quantity.
• "Is an inferior good a bad product?" No — it just means demand falls when income rises. Many perfectly fine goods become less popular as people get richer (bus rides, instant noodles).