1.2.1 Demand

Demand

🔗 The number of consumers willing and able to purchase a product at a given price

• Lower price = Higher quantity demanded
• Higher price = Lower quantity demanded

Factors leading to a change in demand

• Changes in the prices of substitutes 🔗 Demand for a good will fall as the prices of substitute goods fall. This is because consumers can buy a similar product for a cheaper price.

• Changes in consumer incomes 🔗 Demand for a good will rise as consumer incomes rise. This is because consumers have more disposable income to spend

• Advertising and branding 🔗 Demand for a good will increase when there is greater advertising and stronger branding for that product. This is because it can reach a larger market and may have greater appeal.

• The price of complementary goods 🔗 Demand for a good will fall as the price of the other good increases as the items are commonly purchased together

• Fashions, tastes and trends 🔗 Demand for a good will rise when it is in fashion

• Demographics 🔗 Demand for a good can rise as the population increases

• External shocks 🔗 Demand for a good may fall as internal shocks rise. This is because consumers may become more cautious when spending

Seasonality

• Demand for a good can change when months, the weather and seasons change e.g. only buying ice cream in summer/hot weather

🔑 When the quantity demanded increases, the demand curve shifts to the right

🔑 When the quantity demanded decreases, the demand curve shifts to the left