2.2 Demand: Paper 1: OCR A-level Economics Revision and Macroeconomics

Market

A market is created when buyers and sellers interact.

Sub-market

A sub-market is part of an overall market, but it has some unique characteristics. In each sub-market, there is a different market structure. For example, from the market of banking, each sub-market could be credit cards, loans, mortgages or savings accounts.

Demand

Demand is the quantity of a good or service that consumers are able and willing to buy at a given price during a given period of time.

Marginal Utility

Marginal utility is the extra satisfaction derived from consuming one extra unit of the good.

Individual Demand

Individual demand is the demand of an individual or firm, measured by the quantity bought at a certain price at one point in time.

Market Demand

Market demand is the sum of all individual demands in a market.

Derived Demand

This is when the demand for one good is linked to the demand for a related good. For example, the demand for bricks is derived from the demand for the building of new houses.

Composite Demand

This is when the good demanded has more than one use. An

example could be milk. Assuming there is a fixed supply of milk, an increase in the demand for cheese will mean that more cheese is supplied, and therefore less butter can be supplied

Joint Demand

This is when goods are bought together, such as a camera and a memory card.

Competitive Demand

This is the demand for goods which are substitutable, so the sale of the good is in competition with the substitute. For example, a Samsung TV is in competitive demand with a Sony TV.

Population

The larger the population, the higher the demand. Changing the structure of the population also affects demand, such as the distribution of different age groups.

Income

If consumers have more disposable income, they are able to afford more goods, so demand increases.

Related Goods

Related goods are substitutes or complements. A substitute can replace another good, such as two different brands of TV. If the price of the substitute falls, the quantity demanded of the original good will fall because consumers will switch to the cheaper option. A complement goes with another good, such as strawberries and cream. If the price of strawberries increases, the demand for cream will fall because fewer people will be buying strawberries, and hence fewer people will be buying cream.

Advertising

This will increase consumer loyalty to the good and increase demand.

Tastes and Fashions

The demand curve will also shift if consumer tastes change. For example, the demand for physical books might fall, if consumers start preferring to read e-books.

Expectations

This is of future price changes. If speculators expect the price of shares in a company to increase in the future, demand is likely to increase in the present.

Seasons

Demand changes according to the season. For example, in the summer, the demand for ice cream and sun lotions increases.