1.1.3 Demand

Chapters 3 & 4
1.1.3 Demand Unit 1.1: The Market System

What you need to know
about demand
a. Definition of demand
b. The use of demand curve diagram to show:

• changes in price causing movements along a demand curve
• shifts indicating increased and decreased demand
c. Factors that may cause a shift in the demand curve, including:
• income
• price of substitute goods
• price of complementary goods
• Fashion/tastes/trends
• demographic changes
Demand
 Demand is the amount of a product that consumers are willing and able to buy, at a specific
price, at a specific point in time
 Willing suggests that the consumer wants to buy the product
 Able suggests that the consumer has the means to buy the product
 Specific price means a particular price e.g. 120 Baht
 At a specific point in time suggests that demand occurs in one time frame e.g. one day
The individual demand curve
 Economists can collect data regarding individual’s demand for

goods at different prices e.g. how many apples a person would
buy if the price was 10, 20, 30 THB.
 This can then be used to construct a diagram.
 We call this an individual demand curve – it shows the
consumers quantity demanded for a product at a range of
prices.
 The law of demand states that (ceteris paribus) as the price of a
product decreases, the demand for that product will increase
(vice-versa).
 Demand curves therefore typically slope downwards from left to
right.
Demand schedule
 A demand schedule is a table of data, showing the demand for a good or service at
various prices.
 Below is a demand schedule for an individual consumer of books. As the price of a
book falls, demand increases
 Use the demand schedule to draw a demand curve
Price of
books (£)
Quantity of
books
demanded
The demand curve
Rules for drawing a demand curve:
• label the y axis price and the x axis quantity
• draw the demand curve downward sloping downwards Price
from left to right and label it D
• to find the quantity demanded at any given price:
a) select a price (P), shown on the y axis p
b) draw a dotted line towards the demand curve D
q
Quantity
c) draw a dotted line down towards the x axis to
show quantity (q)
The demand curve: a movement along
A movement along the demand curve

is caused by a change in price. Price
n
tio
rac
nt
p2
co
n
sio
If the price reduces from p to p1 there will
n
p
te
ex
be an expansion in demand from q to q1.
p1
D
If the price increases from p to p2 there will
be a contraction in demand from q to q2. q2 q q1
Quantity
Occurs due to a non-price factor.
An increase in demand is shown by a shift to the right.

A shift in the demand
A decrease in demand is shown by a shift to the left.
Non-price factors include changes in:

• income
• price of substitutes (i.e. Pepsi is a substitute to Coca-cola)
• price of complements (PlayStation games and PlayStation consoles)
• fashion/tastes/trends
Increase in demand Decrease in demand
curve
Price Price
D1 D
D D1
Quantity Quantity
A shift in the demand curve: decrease
• The demand curve has shifted to

Price
the left from D to D1.
• Perhaps due to a fall in consumer
income
p • At price P, the quantity demanded
has decreased from q to q1.
D
D1 • This is because, ceteris paribus, the
q1 q Quantity consumer can’t afford to buy as
much of this product as before.
A shift in the demand curve: increase
• The demand curve has shifted to

Price
the right from D to D1.
• Perhaps due to an increase in the
price of a substitute good.
p • At price P, the quantity demanded
has increased from q to q1.
D1
D • This is because, ceteris paribus,
q q1 Quantity consumers are likely to substitute
away from the more expensive
product to the cheaper one.
As mentioned before, non-price factors
Non-price factors
cause a shift in the demand curve.
The main factors are changes in:
Price of Price of Fashions/

Income substitute complementary tastes/ demographics
goods goods trends
Income determined a consumer’s purchasing power
If income increases, ceteris paribus, then demand for

normal goods is likely to increase.
Non-price Consumers can afford to buy more than before.
factors Income It is assumed that total satisfaction (utility) increases when

consumers buy more.
The extent to which demand changes for a product

depends on the income elasticity of demand (YED - Unit 1.4
elasticity)
Disposable income is affected by government income tax
decisions.
Non-price factors
Price of substitutes
Substitute goods are two alternative goods that could be used for the same purpose i.e. butter
and margarine
If the price of a substitute good falls, CP, this will lead to a fall in demand i.e. price of a Tesla
falls, the demand for a BMWs will decrease.
If the price of a substitute good increases, CP, this will lead to an increase in demand i.e. price
of Nike trainers increases, the demand for Adidas trainers will increase.
The extent to which this happens depends on how close the two products are substitutes (unit
1.4 elasticity)
Non-price factors
Price of complements
Complementary goods are products which are used together i.e. fountain pen and
ink cartridge.
If the price of a complementary good falls, CP, this will lead to an increase in
demand i.e. price of a milk falls, the demand for cereals will increase.
If the price of a complementary good increases, CP, this will lead to a decrease in
demand i.e. price of tennis balls increase, the demand for tennis rackets will fall.
The extent to which this happens depends on how close the two products are
complements (unit 1.4 elasticity)
Non-price factors
Fashion/tastes/trends
• Tastes are constantly changing
• This is particularly true for some industries that see rapid
change e.g. fashion is seasonal
• Fashion/tastes/trends are heavily influenced by advertising
• A sports star wearing a new version of a product is likely to
lead to an increase in the demand for that product.
• There tends to be a positive correlation between advertising
budget and sales.
Demographics
Changes in the make-up of the population will

change demand
Non-price factors An ageing population looks to buy different
products e.g. greater use of health care
Younger people are moving into flats as an
alternative to the expensive housing market
Immigration has seen demand increase for
products from EU and non-EU countries
Questions
1. What is meant by consumer income?
2. Explain how the level of demand is affected
by consumer income.
3. Explain how the type of demand is affected
by consumer income.
4. Explain how the level of employment will
influence demand.
5. Explain how an ageing population will impact
on the types of goods and services needed.
1. Define demand
2. Draw a demand curve
3. State 4 factors that influence demand
Quick 4. State a substitute to pasta

quiz
5. State a complement to pasta
6. With the use of 2 diagrams, explain the

difference in a movement along a demand curve
and a shift in a demand curve
What you need to know
about demand
a. Definition of demand
b. The use of demand curve diagram to show:

• changes in price causing movements along a demand curve
• shifts indicating increased and decreased demand
c. Factors that may cause a shift in the demand curve, including:
• income
• price of substitute goods
• price of complementary goods
• Fashion/tastes/trends
• demographic changes

1.1.3 Demand

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Chapters 3 & 4

1.1.3 Demand Unit 1.1: The Market System

b. The use of demand curve diagram to show:

 Specific price means a particular price e.g. 120 Baht

 Economists can collect data regarding individual’s demand for

a) select a price (P), shown on the y axis p

b) draw a dotted line towards the demand curve D

A movement along the demand curve

An increase in demand is shown by a shift to the right.

Non-price factors include changes in:

• The demand curve has shifted to

• The demand curve has shifted to

The main factors are changes in:

Price of Price of Fashions/

If income increases, ceteris paribus, then demand for

Non-price Consumers can afford to buy more than before.

factors Income It is assumed that total satisfaction (utility) increases when

The extent to which demand changes for a product

Changes in the make-up of the population will

2. Draw a demand curve

3. State 4 factors that influence demand

Quick 4. State a substitute to pasta

6. With the use of 2 diagrams, explain the

b. The use of demand curve diagram to show:

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