1.2.1 Demand

Demand

The number of goods/services customers are willing to buy at a given price

“Inverse relationship" between Price and Demand

As ____ increases, ____ decreases

As ____ decreases, ____ increases

As price increases, demand decreases

As price decreases, demand increases

Change in Price

Change in a Non-price factor

Leads to movement Along Demand Curve

Shifts Demand Curve left or right

Changes in the price of substitutes

Rise in consumer income

Demand for Normal Goods Increase + Inferior Goods Decrease

Normal goods

Goods where Demand slightly increases when consumer incomes increase

Complementary Goods

Goods consumed together eg cars and petrol

If the price of one increases the demand for the other may fall

Factors that cause a Shift in Demand Curve

What is the Acronym

PIRATES

Population - As population grows demand increases

Income

• Normal goods Demand increases with income

• Inferior goods demand Falls as Income Rises

Related goods

• if Price of Substitute rises, Demand Increases

• If Price of Complimentary rises, Demand Falls

Advertising + publicity

Tastes

Expectations of future prices

Seasonal factors - eg icecream

Inferior Goods

Demand decreases as Income increases

PIRATES

Population - As population grows demand increases

Income

• Normal goods Demand increases with income

• Inferior goods demand Falls as Income Rises

Related goods

• if Price of Substitute rises, Demand Increases

• If Price of Complimentary rises, Demand Falls

Advertising + publicity

Tastes

Expectations of future prices

Seasonal factors - eg icecream