Chapter 3:The Demand Curve

CASE STUDY: CARPET STALL

1 ▶ How many carpets would be
bought at a price of MAD 100?
According to the table, when the
price of carpets is MAD 100, 50
carpets will be purchased per week.
2 ▶ What happens to the number of
carpets bought as the price
increases?
As the price of carpets goes up, the
number purchased per week falls.
For example, when the price is
increased from MAD 100 to MAD 120,
the number of carpets purchased
falls from 50 to 40.
3 ▶ What happens to the number of
carpets bought when the price is
lowered?
When the price of carpets is lowered
the number purchased per week
rises. For example, if the price is
reduced from MAD 100 to MAD 80,
the number of carpets purchased
rises from 50 to 60.

ACTIVITY 1
DEMAND FOR CRICKET TICKETS
1 ▶ What will the attendance be if
Rs 400 is charged to attend a
match?
The attendance will be 7500 if Rs
400 is charged for a match.
2 ▶ What price must be charged to fill
the stadium?
To fill the stadium, the price must be
 set at Rs200.
At Rs 200, 30 000 spectators would be attracted. This is full
capacity.

MULTIPLE-CHOICE QUESTIONS
1 ▶ D is the answer. When the price changes, the new quantity
demanded is found by moving along the demand curve.
2 ▶ D is the answer. A fall in income will cause demand to fall at all
prices. Therefore, the demand curve will shift to the left. Remember
that a change in price will result in a movement along the demand
curve. A change in price will not cause the demand curve to shift.

CASE STUDY: AL’S BIG BURGERS

1 ▶ What is meant by effective demand?
Effective demand shows how much would be bought (i.e. how much
people can afford to buy and would actually buy) at any given price.
It does not mean how much people would like to buy if they had an
endless amount of money. Effective demand is demand supported by
the ability to pay.

2 ▶ Draw a demand curve using the information in Table 3.3.

3 ▶ Al currently charges US$3 for his giant burgers. How many

burgers would he expect to sell at this price?
At US$3 Al would expect to sell 600 burgers.
4 ▶ If Al wanted to sell 1400 burgers, what price would he have to
charge?
If the price is lowered from US$3 to US$2 demand for burgers will
 rise from 600 to 1000. The percentage change is given by:
Percentage change = 400 ÷ 600 × 100 = 66.7 per cent
Therefore demand will increase by 66.7 per cent when the price is
cut from US$3 to US$2.
5 ▶ What is meant by the inverse relationship between the price and
the quantity demanded for a product? Use this case as an
example in your answer.
There is an inverse relationship between the price charged for a
product and the quantity demanded. This means that when price
goes up demand goes down and when price goes down the quantity
demanded goes up. For example, in this case, if Al charges US$2 for
a burger he would expect to sell 1000 burgers. However, if he
increased the price to US$3 demand would drop to 600 burgers. Price
and quantity demanded move in opposite directions.