The theory of demand The amount consumers are willing to purchase at a given price over a period of time.

The demand schedule for Soneji’s Super Socks The amount consumers are willing to purchase at a given price over a period of time Price per pair of socks (£) Quantity demand (1st Quarter) 1 50 1.50 45 2 40 2.50 35 3 30 3.50 25 4 20 4.50 15 5 10

The laws of demand (for normal goods) As price rises, demand will fall. As price falls, demand will rise. The demand curve slopes downwards from left to right. Price (p) d Quantity demand (Qd)

Movements along the demand curve (an extension in demand) Movements along the demand curve are caused by a change in price. A extension in demand is brought about by a fall in price. p p1 extension in demand p2 d Qd Qd1 Qd2

Movements along the demand curve (a contraction in demand) Movements along the demand curve are caused by a change in price. A contraction in demand is brought about by a rise in price. p p2 contraction in demand p1 d Qd Qd2 Qd1

Types of demand (6 marks) Match the key term and definition placing a number in the shaded box 1. Effective demand A good that is in demand for more than one purpose, e.g. petrol for both cars and running machines. 2. Market demand Where the demand for one good creates demand for another, e.g. cars and petrol. (have one and therefore need the other) 3. Aggregate demand Where the demand for one good or service stimulates the demand for another, e.g. the demand for bread creates a demand for wheat. (need one to make the other) 4. Composite demand Demand supported by the ability of consumers to carry out their demand wishes 5.Joint demand The total demand for all goods and services in an economy 6.Derived demand Total demand in a market for a good, the sum of all individuals’ demand at a given price over a period of time.

Shifts in the demand curve The factors of demand are forces behind market demand. A change in any one of these will affect market demand . Any changes in the factors of demand will cause the entire demand curve to shift across. positive change in the factors of demand will cause the demand curve to shift across to the right. A negative change in the factors of demand will cause the demand curve to shift across to the left.

The factors of demand A change in consumer incomes. A change in the population. A change in tastes and preferences. A change in the price of substitute goods. A change in the price of complementary goods. A change in government legislation.

Price per pair of socks (£) The demand schedule for Soneji’s Super Socks The amount consumers are willing to purchase at a given price over a period of time Price per pair of socks (£) Quantity demand (1st Quarter) (2nd Quarter) 1 50 60 1.50 45 55 2 40 2.50 35 3 30 3.50 25 4 20 4.50 15 5 10

A positive change in the factors of demand An increase in consumer incomes. An increase in the population. A change in tastes and preferences in favour of the good or service. A rise in the price of a substitute good. A fall in the price of a complementary good. A change in government legislation in favour of the good or service. More is demanded at each price p p1 d1 d2 Qd qd1 qd2

Price per pair of socks (£) The demand schedule for Soneji’s Super Socks The amount consumers are willing to purchase at a given price over a period of time Price per pair of socks (£) Quantity demand (2nd Quarter) (3rd Quarter) 1 60 50 1.50 55 45 2 40 2.50 35 3 30 3.50 25 4 20 4.50 15 5 10

A negative change in the factors of demand A fall in consumer incomes. A decrease in the population. A change in tastes and preferences away from the good or service. A fall in the price of a substitute good. A rise in the price of a complementary good. A change in government legislation against the good or service. Less is demanded at each price p p1 d2 d1 Qd qd2 qd1