10th Grade

Foundations
Microeconomics

Week 3
2.1 Demand

3
As a consumer
 Demand
Demand is the different quantities of goods
Demand Definition that consumers are willing and able to buy at
different prices.
 Law of Demand

The law of demand states there is an INVERSE relationship

Definition between price and quantity demanded

When, Price Quantity

When, Price Quantity

 Demand Curve
• A demand curve is a graphic representation of a demand schedule.

• The demand curve is downward sloping showing the inverse relationship between
price (on the y-axis) and quantity demanded (on the x-axis)

• When reading a demand curve, assume all outside factors, such as income, are held
constant. (This is called ceteris paribus)
Demand Curve
Where do you get the Market Demand?
 Movement along the demand curve

The want or willingness of consumers to buy a

product

To be an effective demand a consumer must have

enough money to buy the product

As price rises, the quantity demanded by

consumers contracts

As price falls, the quantity demanded by

consumers extends
A demand curve slopes downwards
Movement along the demand curve

1.Extension in demand price decrease, quantity increase

2.Contraction in demand price increase, quantity decrease

 Shift in demand curve
Change in demand: 7 Factors

This is a change in demand, not a change in quantity demanded

 Shift in demand curve

1. What if cereal makes you smarter?

2. What if cereal causes baldness?

Shift in demand curve
What if cereal makes
you smarter?
Shift in demand curve
What if cereal causes
baldness?
 Shift in demand curve
Factor 1: Changes in Income
Normal Goods Inferior Goods
- As income increases, demand - As income increases, demand
increases falls
- As income falls, demand falls - As income falls, demand
increases
 Shift in demand curve
Factor 2: Changes in the price of related products

Substitutes can satisfy the same want Complements are in joint demand
Shift in demand curve
Factor 3: Advertising
 Shift in demand curve
Factor 4: Changes in Population
Shift in demand curve
Factor 5: Taste and Fashion
Shift in demand curve
Factor 6: Expectation
Shift in demand curve
Factor 7: Other Factors
 Shift in demand curve

The sum of all individual consumer demands for a particular product

A rise in demand
The market demand curve shifts outwards

Possible causes are:

• an increase in disposable incomes after tax
• a rise in the price of substitutes
• a fall in the price of a complement
• tastes and fashion favour the product
• an increase in advertising
• a rise in the population
• other factors, e.g. hot weather increases
demand for cold drinks and sun creams
 Shift in demand curve

The sum of all individual consumer demands for a particular product

A fall in demand
The market demand curve shifts inwards

Possible causes are:

• a fall in disposable incomes after tax
• a fall in the price of substitutes
• a rise in the price of a complement
• tastes and fashion favour other products
• a reduction in advertising
• a fall in the population
• other factors, e.g. hot weather reduces the
demand for winder coats
Let's practice!!
Let's practice!!
Let's practice!!