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Chapter 2

Demand

2.1 Individual and market demand

 Individual demand represents the amount that a consumer is willing and able to
purchase at a given price – i.e. effective demand. Market demand shows the
total amount of effective demand from all the consumers in a market – it is an
aggregate.

2.2 Factors affecting demand for a good

 the price of the good For most goods as P↑, demand ↓ due to
substitution and income effects

 prices of other goods Substitutes v complementary goods

 income Compare normal goods v inferior goods
 taste/fashion Could be influenced by advertising

 other factors Population size, credit terms...

2.3 Changes in the factors affecting demand

Changes in price Changes in the conditions of demand

Leads to movements along the curve Leads to movements of the curve

P P Shift in demand

D 1 D 2
D P↑ – Contraction Right – increase

Left – decrease

P↓ – Expansion

Q Q

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