The Theory of Market Demand

Demand is the quantity of a product that consumers are willing and able to buy at a given price in a given
time period.

Individual demand relates to a single consumer in the market - e.g. your individual demand for iTunes
downloads or pizza from Dominos

Market demand is the sum of demand from consumers in the market - e.g. the market demand for coffee
beans comes from all of those agents who need to buy coffee perhaps for roasting into coffee beans or as
another ingredient in food processing

The law of demand is that as price declines, the quantity demanded expands, and that as price rises, the
quantity demanded contracts. (We see a movement along a demand curve)

Changes in factors other than the price of the product itself can bring about a shift in the level of demand
at each prevailing price. These are known as changes in the conditions of demand. (We see a shift in the
position of a demand curve)

Exercise on the determinants of demand

Demand for? Change in the market Movement (i) For a (ii) For a shift
along curve movement - in demand -
or shift in the expansion or increase or
demand contraction? decrease?
curve?

Demand for London A rise in the level of the

Underground tickets London congestion charge
from £8 to £15

Demand for alcohol The local council introduces

in Edinburgh pubs a ban on “Happy Hours”
and 2 for 1 deals

Demand from the A fall in the average level of

UK for foreign real incomes for UK
holidays to Turkey households

The UK market A rise in the average price

demand for new of second-hand cars in the
cars UK

The demand for A fall in the retail price of

memory cards entry-level digital cameras

Demand for organic, A rise in the cost of

free-range chicken supplying organic free-
range chicken to
supermarkets

Demand for Unseasonally warm spring

Tennentʼs lager weather in Scotland

Demand for Harris Rising incomes in emerging

Tweed suits market countries
 Demand for? Change in the market Movement (i) For a (ii) For a shift
along curve movement - in demand -
or shift in the expansion or increase or
demand contraction? decrease?
curve?

Demand for film A fall in the cost of

DVDs bought in subscriptions to LoveFilm
store and iTunes

Demand for Rising prices for crude oil in

Hummers (SUV) world markets

Demand for A glut of potatoes is

potatoes available following an
exceptional harvest

Demand for rented Government announces a

property in London fall in the number of
migrants living and working
in London

Demand for cigars A rise in the price of cigars

because of a higher tax

Demand for fridge Expectations grow of a

freezers double-dip recession for the
UK in 2012

Demand for electric A summer heatwave .....

fans fails to appear as forecast!

Demand for Official figures show that life

hearing-aids expectancy is rising and is
expected to continue doing
so

Demand for electric A rise in the average level of

fans household electricity bills
due to higher world energy
prices

Demand for beef Expectations among

steak consumers that prices will
rise significantly in the
coming weeks

Demand for cinema Orange continues to provide

tickets on a a Orange 2 for 1 offer into
Wednesday evening 2012 and 2013

Demand for brick- Construction companies

layers report an upturn in expected
sales and new house-
building