Demand

The quantity of a good or service that consumers are willing and able to buy at each possible price, over a given time period. Both willingness AND ability to pay are required.

When the price of a good falls, your money stretches further — you feel richer (higher real income) even though nominal income has not changed. This increased purchasing power means you can afford to buy more of the good.

A graph showing how much of a good consumers want to buy at every possible price. Price (P) is on the vertical Y-axis, quantity demanded (Q) on the horizontal X-axis. It slopes downward from left to right.

When the price of a good falls, it becomes relatively cheaper compared to substitutes. Consumers switch towards it and away from the now-relatively-more-expensive alternatives, increasing quantity demanded.

Price (P) on the Y-axis, Quantity (Q) on the X-axis, curve labelled "D" (or "D₁" if showing a shift), and a title (e.g., "Market for wheat"). Unlabelled diagrams lose marks in exams.

Demand backed by both the willingness and the ability to pay. Simply wanting something is not demand in economics — you must also be able to afford it at the given price.

As the price of a good falls, the quantity demanded rises — and as the price rises, the quantity demanded falls — ceteris paribus (all other things being equal).

Individual demand is how much one consumer wants to buy at each price. Market demand is the total (horizontal sum) of all individual demands in the market. In exams, "demand" means market demand unless stated otherwise.

As price rises, quantity demanded falls; as price falls, quantity demanded rises. High price = top-left of the curve (low Q). Low price = bottom-right of the curve (high Q).

"All other things being equal." The law of demand only holds if all other factors (income, tastes, related goods) remain unchanged. Without this assumption, we cannot isolate the effect of a price change on quantity demanded.

Because the quantity consumers want to buy changes at different prices and over different time frames. Saying "demand is 500 units" is meaningless without stating the price level and whether it is per day, week, or year.

Because of the inverse relationship between price and quantity demanded: at lower prices consumers buy more (income effect makes them feel richer, substitution effect makes the good relatively cheaper), explained by the law of demand.

Top-left: high price, low quantity demanded. Bottom-right: low price, high quantity demanded. Moving down along the curve shows consumers buying more as the price falls.

A student might want a new MacBook (willingness), but if they cannot afford £1,500 (no ability to pay), there is no effective demand. Demand only exists when willingness and ability to pay are both present.

When price falls: (1) Income effect — your purchasing power rises so you buy more. (2) Substitution effect — the good is now relatively cheaper so you switch to it. Both effects increase quantity demanded, creating the downward slope.

If a product becomes more popular (through advertising, trends, health studies, or social media), demand shifts right. If it falls out of favour (e.g., a health scare), demand shifts left.

Normal good: demand rises when income rises (positive relationship). Inferior good: demand falls when income rises because consumers switch to better alternatives. Whether a good is normal or inferior depends on the consumer.

A change in the good's own price causes a movement along the existing curve. A change in any non-price factor (income, tastes, related goods, expectations, population) shifts the entire curve to a new position.

Substitutes are goods that can be used instead of each other (e.g., Coke and Pepsi). If the price of Good A rises, demand for Good B (the substitute) rises — consumers switch to the cheaper alternative.

More buyers in the market means more demand at every price (demand shifts right). Population growth, immigration, or a new demographic entering the market all increase demand. Population decline shifts demand left.

T — Tastes and preferences, I — Income of consumers, R — Related goods (substitutes and complements), E — Expectations about future prices or income, S — Size of the population (number of buyers).

An increase in demand — at every price, consumers now want to buy more. The whole curve moves right (D₁ → D₂). Caused by factors like higher income (for normal goods), favourable tastes, or population growth.

Complements are goods used together (e.g., cars and petrol, printers and ink). If the price of Good A rises, demand for Good B (the complement) falls — you buy less of both.

If consumers expect prices to rise soon, they buy more now (demand shifts right today). If they expect income to fall, they buy less now (demand shifts left). If they expect a better model soon, they delay purchasing (demand shifts left).

A successful advertising campaign for a new smartphone makes consumers aware of and want the product. Demand shifts right — at every price, more people now want to buy. The reverse happens after negative publicity or a product scandal.

A decrease in demand — at every price, consumers now want to buy less. The whole curve moves left (D₁ → D₃). Caused by lower income (for normal goods), negative change in tastes, or population decline.

Demand falls (shifts left). When income rises, consumers switch to higher-quality alternatives. Example: instant noodles — when students start earning more, they buy restaurant meals instead, reducing demand for instant noodles.

Because examiners award marks for identifying the cause. Saying "demand increased" is incomplete — you must explain what caused it (e.g., "rising incomes shifted demand right because consumers could afford more").

Demand for margarine rises (shifts right). Butter and margarine are substitutes — when butter becomes more expensive, consumers switch to margarine as a cheaper alternative.

Demand for petrol shifts right today — consumers rush to buy now before the price increase. This is the expectations determinant at work: anticipated future price rises increase current demand.

A change in the price of the good itself. When price rises, you move up and left along the curve (Qd falls). When price falls, you move down and right (Qd rises). The curve does not move to a new position.

A change in any non-price factor: income, tastes and preferences, prices of related goods (substitutes or complements), expectations about the future, or population size. The entire curve moves to a new position.

Ask: "Did the price of this good change, or did something else change?" If the good's own price changed → movement along. If anything else changed (income, tastes, related goods) → shift of the curve.

A "change in demand" (or "increase/decrease in demand"). This means the whole curve has shifted — at every price, the quantity demanded is now different. Not the same as "change in quantity demanded".

"Increase in demand" means the whole curve shifted right (non-price factor changed). "Increase in quantity demanded" means a movement down-right along the curve (price fell). They describe completely different mechanisms — mixing them up loses marks.

A "change in quantity demanded" (not a "change in demand"). Saying "change in demand" implies the whole curve shifted. This terminology distinction is worth marks in IB exams.

Right shift: rising incomes increase demand for restaurant meals (a normal good). Left shift: a health report linking red meat to cancer decreases demand for beef (negative change in tastes).

An increase in demand (shift right) creates pressure on price to rise at the new equilibrium. A higher price then causes a movement along the demand curve, reducing quantity demanded. These are two separate steps: shift first, then movement.

There is a movement UP and to the LEFT along the existing demand curve. Quantity demanded falls. The curve itself does not shift — you simply move to a higher-price, lower-quantity point on the same curve.

Draw the original demand curve D₁. Then draw a new curve D₂ to the right (increase) or left (decrease). Add an arrow showing the direction. Label both curves clearly and mark the new equilibrium if applicable.

A shift. Income is a non-price factor (the "I" in TIRES). Rising income shifts demand for smartphones (a normal good) to the right, increasing quantity sold at every price. The price of smartphones did not cause this change.

Down and to the right along the existing curve. Quantity demanded increases because the good is now cheaper (both income effect and substitution effect increase Qd). The curve stays in the same position.

Because only the good's own price changed — all other factors (income, tastes, related goods) remained the same. The curve shows the relationship at all prices; a price change just selects a different point on the existing relationship.

Step 1: Identify the cause — is it a price change or a non-price factor? Step 2: Determine the direction — shift right or left? Movement up or down? Step 3: Draw, label axes, curves (D₁ → D₂ or show movement), and explain the new outcome.

It increases. A rightward shift means that at every given price, consumers now want to buy a larger quantity. The entire price-quantity relationship has changed — more is demanded at each and every price level.

Qd = a − bP, where: Qd = quantity demanded, a = the Q-intercept (demand when P = 0), b = the slope (how much Qd changes per unit change in P), P = price. The P-intercept is a/b (the price at which Qd = 0).

At P = 30: Qd = 200 − 4(30) = 200 − 120 = 80 units. P-intercept: set Qd = 0 → 0 = 200 − 4P → P = 50. So demand is zero when price reaches $50.

Graphically: the demand curve shifts RIGHT (parallel shift). Economically: a non-price determinant of demand has increased demand at every price level (e.g. higher income for a normal good, increase in population, change in tastes). The slope (b) doesn't change.

An economics convention from Alfred Marshall. Mathematically P is the independent variable, but economists plot it on the y-axis. This means the slope on the GRAPH = −1/b (the inverse of the equation's slope). On the graph: y-intercept = a/b, x-intercept = a.

MOVEMENT along: caused by a change in PRICE (change in P within Qd = a − bP). Represented by the slope −b. SHIFT: caused by a change in a non-price determinant (change in 'a' — income, tastes, population, related goods). The entire line moves left or right.

The value of 'a' increased from 200 to 250. This is a RIGHTWARD SHIFT of the demand curve. At every price, 50 more units are demanded. The slope (b = 4) didn't change — the curves are parallel. Possible cause: increase in income (normal good), population growth, or favourable taste change.