Demand: willing and able to buy
Demand is effective demand: the quantity consumers are willing and able to buy at a given price. The law of demand (ceteris paribus): as price rises, quantity demanded falls, and vice versa — so the demand curve slopes downward (price up the vertical axis, quantity along the horizontal). Two reasons: the income effect (a lower price raises real purchasing power) and the substitution effect (the good becomes cheaper than substitutes).
Movement along vs shift of demand
A change in the price of the good itself causes a movement along the curve, never a shift: a price fall is an extension, a price rise a contraction. A change in any non-price condition shifts the whole curve — an increase in demand shifts it right, a decrease shifts it left. Use the right words: extension/contraction (movement) vs increase/decrease (shift). Confusing them is the most common error here.
Conditions of demand shift the curve
The conditions of demand (non-price determinants) shift the whole curve: income (higher income raises demand for a normal good, lowers it for an inferior good); price of substitutes (bought instead — a dearer substitute raises demand here); price of complements (bought together — a dearer complement lowers it); tastes/advertising; population; seasons. If the trigger is not the good's own price, it shifts the curve.
Drawn from real examiner reports.
Own-price change is a movement, not a shift
The most frequent error is describing a shift when the cause is the good's own price — which only moves you along the curve. Own-price down = extension, own-price up = contraction; only a change in a condition of demand gives an increase (shift right) or decrease (shift left). Ask: own price -> move along; anything else -> shift the curve.
June 2023 and November 2022 Paper 2: examiner reports note candidates confuse a movement along the demand curve (extension/contraction) with a shift (increase/decrease in demand); the wrong term costs marks.
Analyse, don't just describe the diagram
Describing a diagram is not analysing it. "The demand curve shifts right" only states what is drawn and earns little. To analyse, give the cause (which condition changed and why), the mechanism (excess demand at the old price), and the consequence (equilibrium price and quantity rise). "The curve moves right" alone is insufficient.
November 2022 Paper 22: "describing the diagram is not the same as analysing it" — stating the curve moves right is insufficient; the cause and the consequence for price and quantity must be explained.
State the direction of the demand change
Candidates often explain a determinant but forget to state the direction of the demand change. Name the determinant, then say explicitly "so demand for X rises/falls", and link it to a rightward/leftward shift. In a fruit-vs-cigarettes question, marks were lost for not stating demand would rise for fruit and fall for cigarettes.
June 2023 Paper 22 Q2(b): candidates explained the determinant but did not state that demand would rise (fresh fruit) and fall (cigarettes) — the direction of the demand change must be stated explicitly.
Substitute vs complement
A substitute is a good bought instead of another (tea and coffee); a complement is a good bought together with another (cars and fuel). They shift demand in opposite ways: a dearer substitute raises demand for this good, while a dearer complement lowers it. Getting the pair wrong reverses your analysis.
Demand = willing AND able
Demand in economics means effective demand — being both willing and able to buy at a given price. Merely wanting a good is not demand unless the consumer can also pay for it. Defining demand as "how much people want" loses the mark; include the ability (and willingness) to pay.
Normal vs inferior good
For a normal good, higher income raises demand (shift right); for an inferior good, higher income lowers demand (shift left) as consumers switch to better alternatives. Do not assume every good is normal — a rise in income can reduce demand for an inferior good such as a cheap staple. State which type the good is.
8-mark discuss: two sides + judgement
The 8-mark (d) discuss carries the only AO3 (evaluation) marks. Develop one or two arguments on each side, then a supported, context-specific judgement. Do not just list points, and do not end by repeating them — weigh which side is stronger and why.
Analyse: cause → mechanism → effect
Analyse a demand change in three steps: the cause (which condition changed and why), the mechanism (the curve shifts, excess demand at the old price), and the effect (equilibrium price and quantity rise). A diagram supports the words but does not replace them.
Label the demand diagram fully
Label a demand diagram fully: price on the vertical axis, quantity on the horizontal; the curves D1 (and S) and, for a shift, D2 (D1 -> D2); and both equilibria (P1,Q1 and P2,Q2). Careless or missing labels lose marks even when the economics is right.
Demand — the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
Wanting a good is not demand unless you can also pay for it — this is sometimes called effective demand.
The law of demand: other things being equal (the ceteris paribus assumption), as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises.
Full notes, flashcards, Q&A and the topic quiz for every premium subject.
Premium plans are US$8.99/month or US$49.99/year — first month free.
Studying with a parent's blessing? Show them this.
