The Law of Demand
Explain demand, the demand curve and factors that shift it.
Demand is the quantity of a good consumers are willing and able to buy at each price.
- State the law of demand.
- Distinguish a movement along the curve from a shift.
- Name factors that shift demand.
The Law
Other things being equal, as the price of a good rises, the quantity demanded falls. This gives a downward-sloping demand curve.
Movement or Shift
A change in the good's own price causes a movement along the demand curve. A change in any other factor causes the whole curve to shift.
Shift Factors
- Income — higher income usually increases demand for normal goods.
- Tastes and fashion.
- Price of substitutes and complements.
- Population size and expectations.
When the price of rice rises, quantity demanded falls — movement along the curve.
When incomes rise, people buy more rice at every price — the demand curve shifts right.
Practice
- State the law of demand.
- Explain the difference between a movement along and a shift of the demand curve.
- Name two factors that could shift demand for bread to the right.
Recap
Demand falls as price rises. Price changes move along the curve; other factors shift it.
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Demand, Supply and Price
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