TOPIC 3 : DEMAND

(PART 1)
By:
Siti Norashikin Misman

Siti Norashikin Misman, Economics Unit,

KMB
 LEARNING
OBJECTIVES
At the end of the of this chapter, you should be
able to:
Define a market

Define demand

Explain the law of demand

Identify and explain the non-price determinants of demand

Distinguish between a movement along a demand curve and a shift of

the demand curve.
Understand the relationship between an individual consumer’s
demand and market Siti
demand
Norashikin Misman, Economics Unit,
KMB
 MARKETS
Definition: A market is where buyers and sellers come
together to carry out an economic transaction.
- It can be physical market or online markets.
- Types of market:

Product Factor
markets markets

International
Stocks
financial
markets
markets
Siti Norashikin Misman, Economics Unit,
KMB
 MARKETS

NO MARKETS TRADING OF;

1 PRODUCT Goods and
services
2 FACTOR Factors of
production
3 INTERNATIONAL FINANCIAL International
currencies
(FOREX)
4 STOCK Shares in
KMB
companies
Siti Norashikin Misman, Economics Unit,
 DEMAND
Definition
The quantity of a good or service that consumers are willing and
able to purchase at a given price in a given time period.
For example;
A group of people may buy 150 books, at a price
of RM20, in August 2015
* It is not enough for consumers to be willing to purchase the
goods or services, they must also have the ability to purchase it.
(Ability; financial means)
When the consumers
Effective demand? have both the
willingness and ability
to buy.
Siti Norashikin Misman, Economics Unit,
KMB
 THE LAW OF DEMAND
As the price of a product decreases,
the quantity demanded of it will
usually increase, ceteris paribus.

↓ P, ↑ Qd
Siti Norashikin Misman, Economics Unit,
KMB
 DEMAND

Example; Price of books (RM) Quantity demanded

of books (units)

20 150
15 200
10 250
5 3 00
Table 1: A demand schedule for books

Siti Norashikin Misman, Economics Unit,

KMB
 DEMAND
Diagram:

Diagram 1: The demand for books:

Siti Norashikin Misman, Economics Unit,
KMB
 PRICE DETERMINANT
OF DEMAND

❖ A change in the price of the

product itself will lead to a
change in the quantity
demanded of the product →
A MOVEMENT ALONG THE
EXISTING DEMAND CURVE
❖ Eg; (refer to Table 1)
❖ Increase in demand is for
two reasons:
1) Income effect
2) Substitution effect
Siti Norashikin Misman, Economics Unit,
KMB
 PRICE
DETERMINANT OF
DEMAND
• A decrease in the price of a product, will lead to
an increase in the ‘real income’ which reflects the
Income amount that their incomes will buy.
effect

• A decrease in the price of a product, will make the

product becomes relatively more attractive than
the other products.
Substitution • So, consumers will purchase more of the product,
effect replacing it for products that were previously
purchased.

Siti Norashikin Misman, Economics Unit,

KMB
THE NON-PRICE DETERMINANTS OF DEMAND
2)The price
3)Tastes and
1)Income of related
preferences
goods
4) Future
5) Size of the 6)Seasonal
price
population changes
expectations

7)
Government
policy

Siti Norashikin Misman, Economics Unit,

KMB
 THE NON-PPRICE
DETERMINANTS OF
DEMAND
1) Income

Normal goods Inferior goods

- ↑ Income, - ↑ Income,
↑Demand ↓Demand

↑ Demand; the demand curve will shift to the right.

↓ Demand; the demand curve will shift to the left.

Siti Norashikin Misman, Economics Unit,

KMB
SHIFTING OF DEMAND CURVE

https://www.coursehero.com/sg/microeconomics/factors-that-shift-demand/

Siti Norashikin Misman, Economics Unit,

KMB
 RECAP!

Source:https://www.youtube.com/watch?v=51gBc_7kpTk

Siti Norashikin Misman, Economics Unit,

KMB
 THE NON-PPRICE
DETERMINANTS OF
DEMAND
2) The price of related products
SUBSTITUTES COMPLEMENTS
↑ Pa, ↓ Qda, ↑ Db ↑ Pa, ↓ Qda, ↓Db

Goods that can Goods that

be used in are used
place of UNRELATED together or
another or that adds
have the same - ↑ Pa, ↓ Qda, = Db value to
function another

Siti Norashikin Misman, Economics Unit,

KMB
 Substitutes goods
EXAMPLES?

Siti Norashikin Misman, Economics Unit,

KMB
 Coca Cola vs Pepsi
Effect on the diagram

Siti Norashikin Misman, Economics Unit,

KMB
 Complements goods
EXAMPLES?

Siti Norashikin Misman, Economics Unit,

KMB
 THE NON-PPRICE
DETERMINANTS OF
DEMAND

3) Tastes and preferences

❑ Marketing can alter tastes
❑ Taste can also be influenced using
advertising campaign.
4) Future price expectations
❑ If the consumers thinks the price
of a product will increase in the
future, then they may demand
more of the product in the
present.
Siti Norashikin Misman, Economics Unit,
KMB
 THE NON-PPRICE
DETERMINANTS OF
DEMAND

5) The size of population

❑ If the population is growing then the demand for most
products will increase and their demand curve will shift to the
right.
❑ Age structure factor: If the percentage of elder people in the
economy is starting to increase, the demand pattern will be
reflected (Eg: Increase in the demand for holiday, mobility
scooters etc)
6) Seasonal changes
❑ Eg:Demand for chicken will increase during Chinese New Year
7) Government policy
❑ Eg: Government policy that requiring cyclists to wear safety
helmet will increase the demand for safety helmet

Siti Norashikin Misman, Economics Unit,

KMB
SUMMARY ON THE NON-PRICE
DETERMINANTS OF DEMAND

Siti Norashikin Misman, Economics Unit,

KMB
 Question:

What is the difference between a

movement along a demand curve
and a shift of the demand curve?
1 ) PRICE DETERMINANT VS NON-PRICE
DETERMINANTS

1 ) QUANTITY DEMANDED VS DEMAND

Siti Norashikin Misman, Economics Unit,
KMB
Relationship between an individual consumer’s
demand and market demand

Siti Norashikin Misman, Economics Unit,

KMB
EXERCISE 1: DEMAND

• Attempt Exercise 1
• Submit your answer in the google
classroom

Siti Norashikin Misman, Economics Unit,

KMB
THE END OF TOPIC 3: PART 1

Siti Norashikin Misman, Economics Unit,

KMB