Demand describes willingness and ability to buy at alternative prices over a stated period. A want without resources is not effective demand. Quantity demanded refers to the amount at one price; distinguish it from the complete demand relationship.
Specify product, market, units and time. Demand measures intended purchases under given conditions, not necessarily actual sales if supply is constrained. Changes in several determinants can occur together, so observed sales do not identify a single cause.
Read a demand claim precisely
The law of demand
In the standard downward-sloping model, a lower own price increases quantity demanded, other demand determinants unchanged. With fictional P = 10 − 0.1Q, P6 corresponds to Q40 and P4 to Q60 items per week. The change is movement down the same curve, called extension.
A higher own price creates a contraction up that curve. Draw price on the vertical axis and quantity per period on the horizontal. The curve holds income, tastes, related prices and the relevant buyer group constant; it is not simply a line joining every observed market outcome.
Movement along fictional demand
Reasons
A lower relative price encourages substitution towards a good rather than alternatives. Separately, with money income unchanged, a price fall changes real purchasing power. For a normal good this income effect supports more consumption, reinforcing the substitution effect.
For an inferior good the income effect can oppose substitution; inferior status does not itself mean demand must slope upward. Diminishing marginal utility can provide intuition about willingness to pay for additional units, but is not a claim that all consumers value each unit identically.
Two channels from a lower own price
Movement along vs shift
This good’s own-price change, with other demand determinants unchanged, moves along the curve. A change in a determinant such as income, preferences or a related good’s price can shift it: right means more quantity at each price, left less.
Fictional D1: P = 10 − 0.1Q and D2: P = 12 − 0.1Q give Q40 and Q60 respectively at P6. Compare at the same price to identify the shift. Without supply information, a demand shift alone does not identify the new equilibrium price or actual sales.
A fictional rightward demand shift
Factors shifting demand
Demand shifters include income, preferences, effective advertising, prices of substitutes and complements, expectations and the number or composition of buyers. State direction and mechanism; warmer weather can change demand for a seasonal product, but season and sales correlation alone is not proof.
Normal-good demand rises with income and inferior-good demand falls, other determinants unchanged, over the relevant range. Inferior is not a quality label. A product’s income relationship can differ across buyers and ranges, so use evidence or explicit assumptions rather than brand stereotypes.
Income response is not a quality label
Substitutes and complements
Substitutes are alternatives for a purpose: if coffee and tea are substitutes for these buyers, a higher coffee price can increase tea demand at a given tea price. This shifts tea demand rather than moving along it because tea’s own price has not changed.
Complements are used together in the stated setting. Dearer petrol can reduce demand for petrol cars; cheaper consoles can raise demand for compatible games. Compatibility, existing ownership and efficiency matter: more car purchases do not necessarily add to total petrol use.
Trace the related-good effect
Individual and market demand
Market quantity demanded adds all buyers’ quantities at the same price and period. At £4 per item, A24 plus B12 equals market demand of 36 per week. At £2, A32 plus B16 gives 48; at £6, A16 plus B8 gives 24.
This is horizontal summation: do not add prices or combine quantities measured at different prices. A changed number or composition of buyers may change the market curve even when each existing buyer’s preferences remain unchanged.
Fictional weekly market demand
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Aquantities consumers are willing and able to buy at alternative prices in a stated period
Bthe amount produced
Cthe price
Dprofit
2.In the standard demand model used in this lesson, what is the curve’s slope?
Easy
Aupward sloping
Bhorizontal
Cvertical
Ddownward sloping
3.Along a given downward-sloping demand curve, what happens to quantity demanded when the good’s own price falls, other determinants unchanged?
Easy
Ait stays the same
Bit vanishes
Cit rises
Dit falls
4.What causes a movement along this product’s demand curve, other demand determinants unchanged?
Easy
Aa change in advertising
Ba change in the price of the good
Ca change in income
Da change in tastes
5.What causes a shift of the demand curve?
Easy
Aa change in buyers’ tastes for this good
Ba change in this good’s own price alone
Cno change in any determinant
Donly relabelling the diagram
6.What does an increase in demand look like?
Easy
Aa shift to the left
Ba movement down
Ca movement up
Da shift of the curve to the right
7.What does a decrease in demand look like?
Easy
Aa movement up
Ba movement down
Ca shift of the curve to the left
Da shift to the right
8.What is a substitute good?
Easy
Aa necessity
Bone that can replace another
Cone used with another
Da luxury
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9.What is a complementary good?
Easy
Aone used together with another
Bone that replaces another
Ca luxury
Dan inferior good
10.What is an inferior good?
Easy
Aone that is poor quality only
Bone whose demand rises with income
Ca free good
Done whose demand falls as income rises
11.What is a normal good?
Easy
Aa free good
Ba public good
Cone whose demand rises as income rises
Done whose demand falls with income
12.For these buyers, the cars are stated to be a normal good over this income range. If incomes rise, other factors unchanged, what happens to demand?
Medium
Ait vanishes
Bit rises
Cit falls
Dit stays the same
13.For these buyers, a food product is stated to be inferior over the income range. If income rises, other factors unchanged, what happens to demand?
Medium
Ait may fall
Bit rises sharply
Cit stays fixed
Dit doubles
14.For buyers using petrol and petrol-powered cars together, how may higher petrol prices affect demand for those cars, other factors unchanged?
Medium
Ait rises
Bit is unchanged
Cit doubles
Dit tends to fall
15.Advertising makes buyers more willing and able to buy a product at each given price. How is the change represented?
Medium
Amove along the curve
Breduce demand
Cshift demand to the right
Dshift demand to the left
16.A fall in a good’s own price, other demand determinants unchanged, causes:
Medium
Ano change
Ban extension along the demand curve
Ca shift to the left
Da shift to the right
17.A rise in a good’s own price, other demand determinants unchanged, causes:
Medium
Aa contraction along the demand curve
Ba shift to the right
Ca shift to the left
Dno change
18.Warmer weather makes consumers willing to buy more ice cream at each unchanged price. What demand determinant changed?
Medium
Aa price change only
Bincome only
Cpopulation only
Da seasonal change in tastes and weather
19.Assume consoles and compatible games are complements. A lower console price may shift demand for those games in which direction, other factors unchanged?
Medium
Astay the same
Bdisappear
Crise
Dfall
20.A credible health concern reduces willingness to buy a product at each given price. How does its demand curve change?
Medium
Ahave no effect
Bshift demand to the left
Cshift demand to the right
Dmove along the curve
21.For a normal good, which mechanisms support the standard downward-sloping demand relationship?
Medium
Asubstitution towards the relatively cheaper good and greater real purchasing power
Bconsumers buy less at lower prices
Cthere is no reason
Dprice does not matter
22.What is the substitution effect?
Easy
Aconsumers buy more
Bconsumers buy nothing
Cconsumers copy
Dconsumers switch to cheaper alternatives when a price rises
23.What is the income effect?
Easy
Aprices are fixed
Bthere is no effect
Ca price change changes real purchasing power
Dincome is fixed
24.What is meant by 'ceteris paribus'?
Medium
Ano demand
Ball other things remaining equal
Call things changing
Dthe price rises
25.What is market demand?
Medium
Athe sum of individuals’ quantities demanded at each common price and period
Bone person's demand
Csupply
Dprice
26.The demand curve usually slopes downward.
Easy
True or false?
27.This product’s own-price change causes a movement along its demand curve when other demand determinants are unchanged.
Easy
True or false?
28.A rise in income always increases demand for every good.
Easy
True or false?
29.Complements are goods used together.
Easy
True or false?
30.An increase in demand is shown by a shift to the left.
Medium
True or false?
31.Which can shift the demand curve?
Medium
Aincome
Btastes
Cadvertising
Dpopulation
Ethe price of the good itself
32.Which pairs are substitutes for the stated use? Select all that apply.
Medium
Atea or coffee chosen as alternative hot drinks
Bbutter or margarine chosen as alternative spreads
Ctrain or bus available for the same journey
Dcola or lemonade chosen as alternative soft drinks
Ea petrol-powered car and the petrol it uses
33.Explain why a fall in the price of petrol-powered cars might increase demand for petrol, other factors unchanged.
Medium
34.At £4 per item, buyer A demands 24 items per week and buyer B demands 12. These are the only buyers. What is weekly market quantity demanded at £4?
