Demand
LO: Explain what is meant by ‘demand’ for goods and services, and explain the relationship
between price and quantity demanded
• Demand – the quantity of a good or service that consumers are willing and able to buy at
a given price over a given period of time
• There is an inverse relationship between demand for a good and its price
• When the price of a good/service increases, demand decreases
• When the price of a good/service decreases, demand increases
• Demand curve shows the quantity demanded at
any given price
• A change in price is reflected by a movement
along the demand curve
Reasons why an inverse relationship exists
• Income effect
o A fall in price increases the real purchasing power of consumers, allowing
people to buy more with a given budget
• Substitution effect
o A fall in price of good X makes it relatively cheaper to substitutes causing
consumers to switch to good X leading to a higher demand
_________________________________________________________________________________
LO: Identify the determinants of demand
Other factors that determine the demand of goods and services other than price is:
, LO: Use diagrams to illustrate shifts in the demand curve
• Due to the factors listed above, shifts occur in the demand curve.
• This means at the same price, more of less of that good or service is demanded
• When income increases – means demand for
trainers increases at any given price shifting D1 to
D2
• Written explanation: This graph shows the
consequence to an increase in income. This has
caused the demand for trainers to move outwards
from D1 to D2. This has resulted in the quantity
demand to rise from Q1 to Q2
• Trend: Sliders – means demand falls for trainers at any given price shifting D1 to D3
• Written explanation: This graph shows the consequence to a trend. This has caused the
demand for trainers to move inwards from D1 to D3. This has resulted in the quantity
demand to fall from Q1 to Q3
Demand and total revenue
• TR = P1+Q2
• When D1 shifts to D2, this causes an increase in
the total revenue from OP1aQ1 to OP1bQ2
LO: Explain what is meant by ‘demand’ for goods and services, and explain the relationship
between price and quantity demanded
• Demand – the quantity of a good or service that consumers are willing and able to buy at
a given price over a given period of time
• There is an inverse relationship between demand for a good and its price
• When the price of a good/service increases, demand decreases
• When the price of a good/service decreases, demand increases
• Demand curve shows the quantity demanded at
any given price
• A change in price is reflected by a movement
along the demand curve
Reasons why an inverse relationship exists
• Income effect
o A fall in price increases the real purchasing power of consumers, allowing
people to buy more with a given budget
• Substitution effect
o A fall in price of good X makes it relatively cheaper to substitutes causing
consumers to switch to good X leading to a higher demand
_________________________________________________________________________________
LO: Identify the determinants of demand
Other factors that determine the demand of goods and services other than price is:
, LO: Use diagrams to illustrate shifts in the demand curve
• Due to the factors listed above, shifts occur in the demand curve.
• This means at the same price, more of less of that good or service is demanded
• When income increases – means demand for
trainers increases at any given price shifting D1 to
D2
• Written explanation: This graph shows the
consequence to an increase in income. This has
caused the demand for trainers to move outwards
from D1 to D2. This has resulted in the quantity
demand to rise from Q1 to Q2
• Trend: Sliders – means demand falls for trainers at any given price shifting D1 to D3
• Written explanation: This graph shows the consequence to a trend. This has caused the
demand for trainers to move inwards from D1 to D3. This has resulted in the quantity
demand to fall from Q1 to Q3
Demand and total revenue
• TR = P1+Q2
• When D1 shifts to D2, this causes an increase in
the total revenue from OP1aQ1 to OP1bQ2
