In simple terms
A friendly intro before the formal notes — no formulas yet.
Why We Buy More When Prices Drop
Demand is how much of something people are willing AND able to buy at each possible price. The law of demand says that, other things equal, a lower price leads people to buy more and a higher price leads them to buy less — which is why the demand curve slopes downwards.
Think about your favourite takeaway pizza. If a promotion drops the price from £12 to £8, you and your friends order more this Friday. If it jumped to £20, you'd switch to something else. That is a movement along your demand curve — driven by the pizza's own price. But if your part-time wage went up, you might order more pizza at EVERY price — that is a shift of the whole curve.
- 1
Demand is not just wanting — it is being willing AND able to buy at a given price (effective demand).
- 2
The law of demand: as price falls, quantity demanded rises, giving a downward-sloping curve.
- 3
A change in the good's OWN price causes a movement ALONG the curve (a change in quantity demanded).
- 4
A change in any OTHER factor (income, related-good prices, tastes...) SHIFTS the whole curve left or right (a change in demand).
Explore the concept
Use the live diagram and synced steps — play it or tap a step card to walk through.
Full topic notes
Formal explanation with the rigour you need for the exam.
What economists mean by demand
In economics 'demand' has a precise meaning — it is not simply a want or a desire. Demand is the quantity of a good that consumers are both WILLING and ABLE to buy over a range of prices in a given period. This is called effective demand: if you would love a Ferrari but cannot pay for one, you have desire but not demand. Demand analysis is almost always conducted under the ceteris paribus assumption — 'all other things being equal' — so that we can isolate the effect of a single variable, usually price, while holding every other influence constant.
The law of demand
The law of demand states that, ceteris paribus, as the price of a good falls the quantity demanded rises, and as the price rises the quantity demanded falls. This inverse relationship rests on three reinforcing ideas. The INCOME EFFECT: a lower price raises the real purchasing power of a consumer's income, so they can afford to buy more. The SUBSTITUTION EFFECT: a lower price makes the good cheaper relative to its substitutes, so consumers switch their spending towards it. And DIMINISHING MARGINAL UTILITY: each additional unit consumed yields less extra satisfaction than the last, so a rational consumer will only buy those later, less-valued units if the price is lower. Together these explain why the demand curve slopes downwards.
Inverse relationship: Price ↑ → Quantity demanded ↓, and Price ↓ → Quantity demanded ↑.
Holds under the ceteris paribus assumption (non-price factors constant).
Explained by the income effect, the substitution effect, and diminishing marginal utility.
The result is a downward-sloping demand curve, with price on the vertical axis and quantity on the horizontal axis.
The intuition of diminishing marginal utility
Utility is the satisfaction a consumer gets from consuming a good. Marginal utility is the EXTRA satisfaction from one more unit. The first cold drink on a hot day gives enormous satisfaction; the second is still welcome; by the fourth or fifth the extra satisfaction is small. Because each additional unit is worth less to the consumer, they are only willing to pay a lower price for it. This is the microeconomic engine behind the downward slope: to persuade a consumer to buy extra, lower-valued units, the price must fall — which is exactly the law of demand seen from the consumer's side.
From individual to market demand
Individual demand matters, but firms and governments care about MARKET demand — the total demand from all consumers for a good. To find it we add up the quantities every individual demands at each price. This is called HORIZONTAL summation because we add along the quantity (horizontal) axis, price by price. If different consumers enter the market at different prices, the market curve can have 'kinks', but it remains downward sloping overall.
Movements along vs shifts of the demand curve
This is the single most examined distinction in the topic. A change in QUANTITY DEMANDED is a MOVEMENT ALONG the existing demand curve, and it is caused ONLY by a change in the good's OWN price — for example, a shop cutting the price of a chocolate bar moves consumers down along the curve for that bar.
A change in DEMAND is a SHIFT of the whole curve — right for an increase, left for a decrease. It means that at EVERY price consumers now want to buy more (or less) than before, and it is caused by a change in any factor OTHER than the good's own price. These factors are the non-price determinants of demand.
Change in QUANTITY DEMANDED = movement along the curve = caused by the good's OWN price.
Change in DEMAND = shift of the whole curve = caused by a NON-PRICE determinant.
A rightward shift (D1→D2) is an INCREASE in demand; a leftward shift is a DECREASE.
Label a shift with two curves (D1, D2) and an arrow; label a movement with two points (A, B) on ONE curve.
Never write 'demand goes up' when you mean a price change. Say 'quantity demanded increases/decreases' for a movement along the curve, and 'demand shifts right/left' for a shift. On diagrams, show a movement as two points on ONE curve, and a shift as a second curve (D1 to D2) with a directional arrow. Getting this vocabulary right is often the difference between the middle and top mark bands.
The non-price determinants of demand
These are the factors that shift the whole demand curve. A helpful mnemonic is PIRATES:
Population: more consumers in the market shift demand right; fewer shift it left.
Income: for a NORMAL good, higher income shifts demand right; for an INFERIOR good, higher income shifts demand left.
Related goods: for SUBSTITUTES, a rise in the price of good A shifts demand for good B right; for COMPLEMENTS, a rise in the price of good A shifts demand for good B left.
Advertising and branding: effective campaigns raise consumer loyalty and shift demand right.
Tastes and preferences: fashions, trends and health awareness shift demand either way.
Expectations: expecting future price rises can shift current demand right; expecting price falls can shift it left.
Seasons: demand for goods such as ice cream, winter coats or holiday decorations varies with the time of year.
To analyse a non-price change, use this chain: (1) identify the determinant; (2) state how it has changed; (3) state the effect on demand (increase/decrease) and the direction of shift (right/left); (4) illustrate with a fully labelled diagram showing D1 shifting to D2. Steps 3 and 4 are where most marks are won.
Common mistakes examiners penalise
Confusing quantity demanded with demand — a change in the good's OWN price changes quantity demanded (a movement), NOT demand (a shift). Writing 'lower price increases demand' loses marks.
Confusing a movement ALONG the curve with a SHIFT of the curve — draw a movement as two points on one curve and a shift as a new curve D1→D2; mixing them up is the most common error in this topic.
Treating demand as mere desire — economics studies EFFECTIVE demand (willing AND able to pay), not wants.
Wrong direction for related goods — a rise in the price of a SUBSTITUTE increases demand for the other good (shift right); a rise in the price of a COMPLEMENT decreases it (shift left). Do not swap these.
Assuming higher income always raises demand — it does for normal goods but LOWERS demand for inferior goods.
Unlabelled diagrams — omitting axis labels, the curve label, or the shift arrow caps your marks even when the analysis is sound.
Where this leads
Demand is only half of the story. In the next lessons you will meet supply — the mirror-image behaviour of producers — and then bring the two together to find market equilibrium, where the price and quantity are actually determined. Every idea here (effective demand, the law of demand, movements versus shifts) returns the moment we start moving markets towards, and away from, equilibrium.
Worked examples
See the formulas applied — reveal one step at a time, like the exam.
Zara's weekly demand for cups of coffee at a local café is shown below.
| Price (£) | Quantity demanded |
|---|---|
| 4.00 | 1 |
| --- | --- |
| 3.50 | 3 |
| 3.00 | 5 |
| 2.50 | 7 |
| 2.00 | 9 |
(a) Describe how you would draw and label Zara's demand curve. [2] (b) The price falls from £3.00 to £2.50. Identify and name the change this causes. [2]
- 1
(a) Plot price on the vertical (y) axis and quantity demanded on the horizontal (x) axis. Each row is a point: (1, 4.00), (3, 3.50), (5, 3.00), (7, 2.50), (9, 2.00). Join them to form a downward-sloping line.
- [1] Axes correctly labelled — 'Price (£)' on the y-axis, 'Quantity demanded' on the x-axis, and the curve labelled 'D'.
- [1] Points plotted accurately and joined into a downward-sloping curve.
A market for concert tickets has just two consumers, Anya and Ben.
| Price (£) | Anya's Qd | Ben's Qd |
|---|---|---|
| 100 | 0 | 1 |
| --- | --- | --- |
| 80 | 1 | 2 |
| 60 | 2 | 3 |
| 40 | 3 | 4 |
(a) Derive the market demand schedule. [2] (b) State the market quantity demanded at £60 and explain the method used. [2]
- 1
(a) Sum the two individual quantities at each price:
Paper 1, part (a): Explain, using a demand diagram, the law of demand and TWO non-price determinants that could shift the demand curve. [10]
- 1
Model answer: The law of demand states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded: as price falls, quantity demanded rises, and as price rises, quantity demanded falls. This is explained by the income effect (a lower price raises real purchasing power, so consumers can afford more), the substitution effect (the good becomes cheaper relative to substitutes, so consumers switch towards it), and diminishing marginal utility (each extra unit yields less satisfaction, so consumers will only buy more at a lower price).
How it all connects
The big idea sits in the middle — tap a linked idea to explore the link.
Tap a linked idea to see how it connects back to the main topic — that connection is what examiners reward.
Glossary
Try to recall each definition before you reveal it.
Quick check
Answer in your head first — then tap to check. No pressure.
Revision flashcards
Flip the card. Test yourself before the exam.
Demand
The quantity of a good or service that consumers are willing and able to purchase at each price over a given period, ceteris paribus.
Key takeaways
Review these before you close the topic — retrieval beats re-reading.
- ✓
Inverse relationship: Price ↑ → Quantity demanded ↓, and Price ↓ → Quantity demanded ↑.
- ✓
Holds under the ceteris paribus assumption (non-price factors constant).
- ✓
Explained by the income effect, the substitution effect, and diminishing marginal utility.
- ✓
The result is a downward-sloping demand curve, with price on the vertical axis and quantity on the horizontal axis.
Practice — then mark it
The whole point: a real Cambridge question, marked mark-by-mark.
Get a Paper 1 (a) answer marked: use a demand diagram to explain the law of demand and two non-price determinants
Get a Paper 1 (a) answer marked: use a demand diagram to explain the law of demand and two non-price determinants
Extra simulations & links
PhET, GeoGebra and other curated tools — open in a new tab.
Frequently asked
Checkpoint
One marked question is worth ten re-reads — close the loop before you move on.
Reading it isn’t knowing it — prove it.
Before you move on: do Get a Paper 1 (a) answer marked: use a demand diagram to explain the law of demand and two non-price determinants on paper, snap a photo, and get examiner-style feedback on exactly where you win and lose marks.