Demand, Price & Quantity | Economics for GCSE/IGCSE - Year 11 PDF Download

Introduction to Demand

•  Demand:  It refers to the volume of a product or service that a consumer is ready to purchase at a particular price within a defined timeframe. Effective demand exists when a consumer both desires and can afford a good or service.
•  Demand Curve:  This curve displays the correlation between the price of a product and the amount consumers are willing to buy. While real-world data might create a curve, economists commonly use straight lines for clarity in analysis.

Individual & Market Demand

• Market demand aggregates the individual demand for a particular good or service.
• It is determined by summing up the individual demand quantities across different price levels.

• Individual & market demand can also be represented graphically
  

Diagram Analysis
Analyzing the diagram provided:

• A shop sells both boys and girls swimwear.
• In July, at a price of $10, the demand for boys swimwear is 500 units and for girls is 400 units.
• At a price of $10, the shop's market demand during July is 900 units.

Movements Along a Demand Curve

• If price is the only factor that changes (ceteris paribus), there will be a change in the quantity demanded (QD). This change is shown by a movement along the demand curve.

Diagram Analysis

• The Law of Demand:
  • The law of demand explains the inverse relationship between the price of a good and the quantity demanded.
  • When prices increase, the quantity demanded decreases, and when prices decrease, the quantity demanded increases.
• Price Increase Effects:
  • An increase in price from £10 to £15 results in a movement up the demand curve from point A to B.
  • This leads to a contraction in quantity demanded, where the quantity falls from 10 to 7 units.
  • For instance, if the price of a popular toy increases, fewer people may be willing to buy it, leading to a decrease in sales.
• Price Decrease Effects:
  • A decrease in price from £10 to £5 leads to a movement down the demand curve from point A to C.
  • This results in an extension in quantity demanded, where the quantity increases from 10 to 15 units.
  • For example, if the price of a product decreases, more consumers may be attracted to buy it, leading to higher sales volume.
• Understanding the Inverse Relationship between Price and Quantity Demanded:
  • There exists a fundamental inverse relationship between the price of a product and the quantity demanded (QD).
  • When the price of a product increases, the quantity demanded by consumers tends to decrease.
  • Conversely, when prices fall, the quantity demanded typically rises.