Demand (Copy)
2.3 Demand
2.3.1 Definition of Demand
- Demand = Quantity of a good/service consumers are willing and able to buy at a given price in a given time period.
- Key: Willing + Able.
- Represented by a demand curve (downward sloping).
2.3.2 Price, Demand and Quantity
- Law of Demand: As price ↓, quantity demanded ↑ (inverse relationship).
- Illustrated on a demand curve:
- Extension of demand = movement down the curve (price falls → demand rises).
- Contraction of demand = movement up the curve (price rises → demand falls).
| Change | Movement | Example |
|---|---|---|
| Price falls | Extension of demand | Petrol cheaper → buy more |
| Price rises | Contraction of demand | Pizza more expensive → buy less |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course
2.3.3 Individual and Market Demand
- Individual Demand: Demand of one consumer for a good/service.
- Market Demand: Sum (aggregation) of all individual demands at each price.
Example:
- At $10 per burger:
- Ali buys 2, Sara buys 3, Omar buys 5 → Market demand = 10 burgers.
2.3.4 Conditions of Demand (Non-price Factors → Shift in Demand Curve)
- A shift means the whole curve moves (not just movement along it).
- Increase in demand = curve shifts right.
- Decrease in demand = curve shifts left.
| Condition (Factor) | Effect on Demand | Example |
|---|---|---|
| Income | ↑ income → demand ↑ (normal goods); ↓ income → demand ↓ | More income → more smartphones bought |
| Price of substitutes | If substitute price ↑ → demand for this good ↑ | Coke price ↑ → Pepsi demand ↑ |
| Price of complements | If complement price ↑ → demand ↓ | Gasoline price ↑ → car demand ↓ |
| Tastes & preferences | If good becomes fashionable → demand ↑ | Trendy clothes demand ↑ |
| Population size | More people → demand ↑ | Population growth → more food demand |
| Expectations | If prices expected to rise → current demand ↑ | Buy houses before prices increase |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course
Quick Examples for Exams
- A fall in rice price → extension of demand.
- A rise in laptop price → contraction of demand.
- More young people in population → increase in demand for smartphones.
- A fall in petrol price → increase in demand for cars (complementary).
Memory Hooks
- Law of Demand = inverse price–demand link.
- Movement = caused by price change (extension/contraction).
- Shift = caused by non-price factors (increase/decrease).
- Individual + Market Demand = sum up consumers.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course