121 Demand AS Edexcel New Specification 2015 Business By Mrs Hilton for

From the specification a) Factors leading to a change in demand: – changes in the prices of substitutes and complementary goods – changes in consumer incomes – fashions, tastes and preferences – advertising and branding – demographics – external shocks – seasonality

Guidance from Edexcel

Lesson Objectives To be able to identify and discuss in detail factors that may lead to a change in demand, both price and non-price To be able to answer sample exam questions based on the topic area

Starter If this drink was £5 would you buy it? If this drink was 10p a can would you buy more of it?

Demand is the amount of a good that consumers are willing and able to buy at a given price. The amount of a good demanded depends on: the price of the good the income of consumers the demand for alternative goods which could be used (substitutes) the demand for goods used at the same time (complements) whether consumers like the good (consumer taste)

7 Factors that can lead to a change in demand (or why are we not selling anything anymore?) 1.changes in the prices of substitutes and complementary goods 2.changes in consumer incomes 3.fashions, tastes and preferences 4.advertising and branding 5.demographics 6.external shocks 7.seasonality Lottery winners – will the type of products that they demand change now they have won?

Recap – complementary goods Complementary Demand for one type of good will affect demand for another, purchase is somehow linked, petrol and cars, blu-ray player and blue- ray films

Recap – substitute goods The impact of a change in price will cause consumers to switch products to an alternative good. If air fair is too expansive a consumer could switch to a train or simply drive to their destination.

Changes in the prices of substitutes and complementary goods As prices for substitutes and complimentary goods rise this will change the quantity demanded. £49.99 for a hot drinks machine is OK as long as the capsules are cheap enough. £3.65 for 16, how much is each coffee? What if they were £1 for 16, would this affect demand for the machines?

Changes in consumer incomes As consumers’ incomes rise, then the pattern of demand changes. Can you think of a range of different products that may be bought by each family? How do these lists differ? Think inferior / luxury goods

Fashions, tastes and preferences Fashion Trend - high fashion meets sports

Advertising and branding As products are heavily advertised they may experience an increase in demand. If this did not occur then businesses would not invest in advertising at all. Products in adverts are associated with other things we already have a positive feeling about (see video) Heavy branding on good will help to increase or keep demand stable:

Demographics The UK is experiencing a baby boom – what kinds of products would experience a surge in demand as a result?

Baby Boom = increase in demand for baby products Nappies Prams Baby food Baby bath products Baby clothes Cot blankets

external shocks All of these shocks can cause a change in demand for certain goods Outbreak of war (tanks, guns) Changes in unemployment (inferior goods) House prices change (financial products such as mortgages or loans to improve existing property) Interest rates (cost of borrowing) Inflation rates (cost of living) Tax rates (consumer spending) Exchange rates (imports and exports)

Seasonality – what products experience an increase in demand in these seasons?

Sample question 1 Yotel case material on next slide Business terminology to use when answering the question:  Substitute products  Complementary products  Demographics  Composition of customers  Sensitivity to price and non price factors

2 marks for knowledge 2 marks for application 2 marks for analysis 2 marks for evaluation

Yotel website

Answer question 1

Sample question 2 6 mark question  Notice the question asks for 2 factors  Case study on next slide  Max 3 marks per factor

Answer question 2

Revision Video

Glossary Substitute products; products that can be used in place of each other, for example if no tea is available a substitute hot beverage is coffee or hot chocolate Complimentary products; products that need to be used together, for example a printer will need ink Demographics; the statistical data relating to population - used to describe a group in marketing e.g. UK’s aging population demographics