Demand (Years 8–11) — Economics

The law of demand, why the demand curve slopes down, and the factors that shift demand.

Demand is the quantity of a good or service that consumers are willing and able to buy at each price over a period of time. Simply wanting something is not demand — you must also be able to pay for it.

Why this matters Almost every price you meet — dates at the market, a bus fare, a football — is shaped partly by demand. Understanding it lets you predict how buyers react when prices or conditions change.

The law of demand

The law of demand states that, all other things being equal (ceteris paribus), as the price of a good rises the quantity demanded falls, and as the price falls the quantity demanded rises. There is an inverse relationship between price and quantity demanded.

Why the demand curve slopes down

On a diagram we put price on the vertical axis and quantity on the horizontal axis. The demand curve slopes downwards from left to right. Two reasons explain this:

Income effect: when a price falls, your money goes further, so you can afford to buy more.
Substitution effect: when a price falls, the good becomes cheaper relative to alternatives, so buyers switch towards it.

A rise in income shifts the whole demand curve right, from D1 to D2 - at every price, more is now demanded than before.

Movements along versus shifts

A change in the good's own price causes a movement along the demand curve (an extension when price falls, a contraction when price rises). A change in any other condition shifts the whole curve left or right.

Common exam mistake: writing "demand decreases" when the price alone has changed. A change in a good's own price causes a change in quantity demanded (a movement along the curve); only a change in a non-price factor changes demand itself (a shift of the whole curve). Examiners deduct marks for using the wrong phrase.

Factor changes	Effect on demand
Higher consumer income (normal good)	Shifts right (more demand)
Price of a substitute rises	Shifts right
Price of a complement rises	Shifts left
Fashion or taste turns against it	Shifts left

Key shift factors

Remember them as the letters in PIRATES-style lists, but the core four for IGCSE are: income, the prices of related goods (substitutes and complements), tastes and fashion, and population changes. For example, if the price of tea rises, demand for coffee (a substitute) shifts right, while demand for sugar (a complement to tea) shifts left.

Exam technique: when a question describes a change, decide first whether it is a price change or a non-price change before drawing anything - that decision tells you whether to draw an arrow along the existing curve or redraw the whole curve in a new position.

Put these steps in order to show how a rise in income affects the market for a normal good:

Consumer incomes rise
Demand for the normal good shifts right
At the old price there is now excess demand
Price rises towards a new, higher equilibrium
Quantity bought and sold also rises