DEMAND
LEARNING GOALS
 Explain
 Define
the Law of Demand.
‘Ceteris Paribus’.
 Graphically
show how the law of
demand works.
 Distinguish
between movements
along and shifts in the demand curve.
REVIEW QUESTION

What is a market?
What is the connection
between markets and
exchange of goods?
INTRODUCING
DEMAND
DEMAND
DEFINITION
the quanity of
a product that consumers
are willing and able to buy
at a given price
Is
DEMAND TABLE
PRICE ($)
QUANTITY
100
5
90
6
70
7
50
10
30
16
20
25
10
50
What do
you
observe?
Your Income is
$ 500
THE LAW OF DEMAND STATES:
that as the price for a product
increases, the
quantity demanded will
decrease and vice
versa, as prices decrease
demand will increase (ceteris
paribus)
THE LAW OF DEMAND
THE LAW OF DEMAND
States that as the price for a product
increases, the quantity
demanded will decrease
and vice versa, as prices decrease
demand will increase (ceteris paribus)
CETERIS
PARIBUS
SO…
If all
other factors
remain fixed (constant)
An increase in price
Will cause a decrease
In quantity demanded
CETERIS PARIBUS
CHANGE PRICE ONLY

We will get a MOVEMENT
ALONG
(UP or DOWN)
curve
the
MOVEMENTS ALONG THE DEMAND
CURVE

Changes in
Price
will cause
movements
along the
demand curve.
THE LAW OF DEMAND

NOTE
I
N
V
E
R
S
E
THE GRAPH
P
PRICE ($)
QUANTITY 
120
100
5
100
90
6
80
70
7
50
10
THE DEMAND
CURVE
60
40
30
16
20
20
10
25
50
0
0
10
20
30
40
50
60
Q
THE DEMAND CURVE
Has a negative gradient
 Slopes downwards from left to right
 Opposite relationship between P and Q

Means
AS P
Q
CETERIS PARIBUS
SHIFTS
IN THE
DEMAND
CURVE
SHIFTS IN THE DEMAND
CURVE

What happens if
I
INCREASE
INCOME
INCOME
= $2000
INCOME
$2000
PRICE ($)
A CHANGE IN OTHER
FACTORS
QUANTITY
if income
$500
100
5
90
6
70
7
50
10
30
16
20
25
10
50
NEW
QUANTITY
If Y= $2000
What
happens
to the
DEMAND
CURVE?
SHIFTS IN THE DEMAND CURVE
 The
demand curve shifts OUTWARD
to the

LEFT (decrease)

RIGHT (increase)
Let’s investigate the
REASONS
FOR SHIFTS
In the demand curve
OTHER ?
ECONOMIC
CLIMATE
TASTES &
FASHION
COMPLEMENTS &
SUBSTITUTES
INCOME
FACTORS THAT CAUSE SHIFTS IN
DEMAND

FASHION & TASTES - As
goods become popular
Demand shifts to the right
A DECREASE WILL CAUSE A SHIFT TO THE
LEFT
SHIFTS IN DEMAND
INCREASE INCOME causes
Demand to shift to the right
SHIFTS IN DEMAND
SUBSTITUTES
COMPLEMENTS
Substitutes are goods
that
replace
each
other
e.g. Tea and Coffee



A
decrease
in the demand for tea
will cause an increase

Complements’ are
products which
are used
together
e.g. Tea and Sugar.
An
increase in
the demand for tea
will cause right shift
in the demand curve
for sugar.
SHIFTS IN DEMAND
SUBSTITUTES
COMPLEMENTS
An increase in the
demand of coffee will
cause a decrease in
demand for tea
An increase in demand for
coffee will cause an
increase in the demand
for sugar
QUESTION
What
if we increase the PRICE
of coffee ??? What happens to demand
for tea?
 What about the demand for sugar if the
PRICE of coffee increases?
WHY?
SO …
A FALL in
consumer incomes.
 Decreased demand
for a complement
 Increased demand
for a substitute
 A fall in the
popularity of a
product
 Will ALL cause a
left shift in demand.

DECREASE
IN DEMAND
VOCABULARY
DEMAND
CETERIS PARIBUS
Is the quanity of a
"all other
things being equal or
product that consumers are
willing and able to buy at a given held constant."
price
COMPLEMENTS
Complements’ are products
which are used
together e.g. Tea
and Sugar
SUBSTITUTES
Substitutes are goods that
replace each
other
e.g. Tea and Coffee