Demand

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Learning objectives

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What is a market?

A market is where buyers and sellers trade goods and services.

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Real world context
How might the Black Friday event be related to the idea of demand?

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What is demand?
Demand is concerned with the behaviour of consumers and refers to the
quantities of a product that consumers are willing and able to buy at various
prices, over a period of time, ceteris paribus. Sha Tin College - Business
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Demand schedule
The demand for a product can be presented on a demand schedule. For example, this is
a demand schedule for chocolate bars.

Price of Quantity of
chocolate chocolate bars (per
bars ($) week)

$5 2

$4 4

$3 6

$2 8

$1 10 How else might an individual

consumer’s demand be presented?

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Demand curve
We can plot the demand schedule on a graph with price on the vertical axis and
quantity on the horizontal axis. This is a demand curve.
Demand for Chocolate
Price of Quantity of
chocolate chocolate bars (per
bars ($) week)

$5 2

$4 4

$3 6

$2 8

$1 10

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The law of demand

The law of demand states there is an inverse relationship between the price of a good
or service and the quantity demanded. When prices go up quantity demanded will fall
and vice versa.
Demand for Chocolate

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Movement along the demand curve
Demand for Chocolate When there is a price change, there is a
movement along the demand curve. For
A
example, when the price falls from $5 to $4,
B
there is a movement along the demand curve
from A to B where the quantity demanded rises
from 4 to 6 chocolate bars per week.

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 Brainstorm

Aside from price, what other factors can influence the demand for Netflix
subscriptions?

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Non-price determinants of demand
Although price is regarded as the key determinant of demand, it is not the only factor that
affects demand.
An acronym to help you remember determinants of demand is HIS AGE:

• Habits, fashions, and tastes

• Income

• Substitutes and complements

• Advertising

• Government policies

• Economy

• Special circumstances

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Rightward shift in demand
Assume that Mars bars launched a successful marketing strategy. This increases
quantity demanded for chocolate by 2 bars at every price.
Demand for Chocolate
Quantity Quantity
Price Demanded Demande
before d after

$5 2 4

$4 4 6

$3 6 8

$2 8 10

$1 10 12

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Leftward shift in demand
It is the new year and many people have set a resolution to go on a diet. The quantity
demanded for chocolate decreases by 2 units at every price.
Demand for Chocolate
Quantity Quantity
Price Demanded Demande
before d after

$5 2 0

$4 4 2

$3 6 4

$2 8 6

$1 10 8

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Factors that may shift the demand curve

Changes in any of the HIS AGE factors will result in a shift in the demand curve.

Increase in demand
An rightward shift of the demand
curve (D1 to D2) indicates that more
quantity is demanded at all prices.

Decrease in demand
An leftward shift of the demand curve
(D1 to D3) indicates that less quantity
is demanded at all prices.

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Movements vs shifts

C
𝑷𝟑 Contraction

Extension

𝑸𝟑
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Exam-style questions

What is the law of demand?

A. The assumption that both price and non-price factors affect the level of demand for
a good or service.

B. The influence of non-price factors on the demand for a good or service.

C. The inverse relationship between the price of a good or service and the quantity
demanded.

D. The positive relationship between the price of a good or service and the quantity
demanded.

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Exam-style questions

What does a rightward (outward) shift of the demand curve for a good or service show?

A. A higher level of demand at all given price levels.

B. A highly successful advertising campaign for the product.

C. A lower price charged for the product.

D. A reduction in the demand for the good or service.

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Exercise and case study

Complete the multiple choice and case study questions on pages 27 to 28 of your
textbook.

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Learning objectives

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