 Demand is defined as the quantity of a good or service
consumers are able and willing to buy at a given price
in a given time period.
 Quantity demanded : amount of good or service that
buyers desire to purchase at a particular price during
some period.
 Quantity demanded changes according to the price.
 Quantity demanded is basically a point on the demand
curve, while demand is the actual curve.
 The quantity demanded must include a specific
time period in order to be meaningful.
 For example, if it simply says, "a consumer will
buy a CD for $10," it means nothing. We only
know if the demand is large or small if the time
period is mentioned; for instance, "a consumer
will buy a CD every week for $10."
 The downward slope of the curve reflects the
law of demand.
The Demand Curve
Determinants on Demand
Income
 There are two types of products to consider when
we are attempting to understand how a change in
income affects the demand for a product. These
are normal and inferior goods.
Normal goods
 For most goods, as income rises, the demand for the
product will also rise. Such goods are known as normal
goods.
 As income rises, the demand curve for a normal good
will shift to the right. The size of the shift in demand
will depend upon the good itself.
 An increase in income may cause a small shift to the
right in the demand curve for salt, but a larger increase
in the demand for theatre tickets.
The demand curve
for air travel is shown
in Figure 3.2.
In this case, an
increase in income
shifts the demand
curve for air travel to
the right, so more air
travel is demanded
at every price.
Inferior goods
 If a product is considered to be inferior, then
demand for the product will fall as income
rises and the consumer starts to buy higher
priced substitutes in place of the inferior
good.
 Examples of inferior goods may be cheap
wine or “own brand” supermarket
detergents.
 As income rises, the demand curve for the
inferior good will shift to the left.
 When income gets to a certain level, the
consumer will be buying only the higher
priced goods and the demand for the
inferior good will become zero.
 And so the demand curve will disappear.
The price of other products
 There are three possible relationships
between products.
 They may be substitutes for each other,
complements to each other, or unrelated.
Substitutes
 If products are substitutes for each other, then a
change in the price of one of the products will lead to a
change in the demand for the other product.
 For example, if there is a fall in the price of chicken in
an economy, then there will be an increase in the
quantity demanded of chicken and a fall in the
demand for beef, which is a substitute.
This would lead
to a movement
along the
demand curve for
chicken and a
shift to the left of
the demand
curve for beef.
A fall in the price of chicken from
p to Pi leads to an increase in the
quantity demanded of chicken
from q to q1.
This change in the price of a
substitute means that some
consumers will switch from
buying beef to buying chicken
and there will be a fall in the
demand for beef, at all prices, and
the demand curve will shift to the
left from D to D1.
Even though the price of beef has
not changed, there is a fall in
demand from q to q1.
 In the same way, an increase in the price
of a substitute product will lead to a fall
in the quantity demanded of that
product and an increase in demand
(shift of the demand curve to the right)
for the substitutes whose prices have not
changed.
Complements
 Complements are products that are often purchased
together, such as printers and ink cartridges. If
products are complements to each other, then a
change in the price of one of the products will lead to a
change in the demand for the other product.
 For example, if there is a fall in the price of DVD
players in an economy, then there will be an
increase in the quantity demanded of DVD players
and an increase in the demand for DVDs, which
are a complement.
This would lead to
a movement along
the demand curve
for DVD players
and a shift to the
right of the
demand curve for
DVDs.
As we can see, a fall in the price of
DVD players from p to Pi leads to
an increase in the quantity
demanded of players from q to q1.
This change in the price of a
complement means that some
consumers will now buy more
DVDs to go with the additional
DVD players that they are buying
and there will be an increase in the
demand for DVD5, at all prices,
and the demand curve will shift to
the right from D to D1.
Even though the price of DVDs has
not changed, there is an increase in
demand from q to q1.
Unrelated goods

If products are unrelated, then a change in
the price of one product will have no effect
upon the demand for the other product.
 For example, an increase in the price of toilet
paper will have no effect upon the demand for
pencils.
 We say that the two products are unrelated.
Tastes
 Realize that marketing may alter tastes
and that firms attempt to influence tastes
so that they can shift the demand curve
for their product to the right.
 A change in tastes in favor of a product
will lead to more being demanded at
every price.
The demand curve for
skateboards is shown in Figure
3.5.
If there is an advertising
campaign to encourage the
purchase of skateboards, or if
the world skateboarding
championships are televised
and this leads to more people
wishing to skateboard, then
there will be a shift of the
demand curve for skateboards
to the right.
This means that more
skateboards will be demanded
at every price
Other Factors
 The size of the population:
 If the population begins to grow, then
it is logical to assume that the demand
for most products will increase and
that their demand curves will start to
shift to the right.
Change in the age structure of the
population
If the age structure of the economy starts to alter,
then this will affect the demand for certain
products.
 For example, if the percentage of older people in
an economy starts to increase, then there may be
an increase in the demand for walking frames and
the demand for them would shift to the right.
 At the same time, there may be a fall in demand
for skateboards and the demand curve would shift
to the left.

Changes in income distribution
 If there is a change in the distribution of
income, such that the relatively poor are
better off and the rich slightly worse off, then
there may be an increase in the demand for
basic necessity goods, such as meat, and a
subsequent shift of the demand curve for
meat to the right.
Government policy changes
 Changes in direct taxes, i.e. taxes on
incomes, may affect the money that
people have to spend, and thus their
demand.
 Also, government policies such as
compulsory seat belts, compulsory
wearing of bicycle helmets, or a ban on
smoking in public places, would all affect
demand In the relevant markets.
Seasonal changes
 Changes in seasons may lead to changes
in the pattern of demand in the economy.
 For example, there will be more demand
for warm coats in the winter and less
demand for swimsuits.