Quick Overview
This chapter explains two completely different things:
↕️ Movement along the curve
When price changes, quantity demanded changes. You move along the existing demand curve.
↔️ Shift of the curve
When anything else changes (income, tastes, advertising, etc.), the entire curve moves left or right.
📊 Demand law
Price and quantity demanded move in opposite directions. Higher price = lower demand (ceteris paribus).
🔗 Six conditions matter
Real income, tastes, advertising, substitute prices, complementary prices, and population size all shift demand.
1. What Is Demand? (The Foundation)
Definition
Demand is the amount of a good or service that a consumer is willing AND able to purchase at a given price in a given time period.
Notice the two words: willing and able. If you want a Ferrari but can't afford it, that's not effective demand. You need both the desire AND the money.
💡 "Effective demand" is the exam phrase
Willing but not able = NOT effective demand.
Willing AND able = Effective demand (this is what we measure).
The Demand Curve
A demand curve is a line on a graph showing the relationship between price (on the y-axis) and quantity demanded (on the x-axis). It always slopes downward from left to right.
In real life, demand points scatter everywhere. Economists draw a straight line through them to make analysis easier (and because examiners prefer it).
Simple Demand Curve
PRICE (£)
↑
| • (demand point at low quantity, high price)
| /
| /
| / ← demand curve (downward slope)
|/___________→ QUANTITY DEMANDED
• (demand point at high quantity, low price)
Individual Demand vs Market Demand
Individual demand = how much one person will buy at each price.
Market demand = the sum of all individual demands at each price level. If 100 people each demand 5 units at £10, market demand at £10 is 500 units.
✓ Worked Example: Newspaper Demand in a Village
Four customers; monthly newspaper demand:
Customer 1: 30 copies
Customer 2: 15 copies
Customer 3: 4 copies
Customer 4: 4 copies
Market demand = 30 + 15 + 4 + 4 = 53 copies per month
This is how you calculate market demand: just add them all up at each price level.
? Try This
In July, a shop sells boys and girls swimwear. At £10:
• Boys swimwear demand: 500 units
• Girls swimwear demand: 400 units
What is the shop's market demand for children's swimwear at £10?
2. What Happens When Price Changes? (Movements Along the Curve)
The Law of Demand
The Law of Demand
There is an inverse relationship between price and quantity demanded (when only price changes, ceteris paribus).
In plain English: When price goes up, people buy less. When price goes down, people buy more.
🔍 Ceteris paribus
Latin for "all other things being equal." It means we're assuming income, tastes, advertising, and everything else stay the same—only price changes.