1 Demand is the number of units of goods a
consumer will buy at various prices
2 The Law of Demand states that an increase in price
leads to a decrease in quantity demanded or a decrease
in price leads to an increase in quantity demanded
3 Other Types of Demand
3.1 Effective Demand
Consumers must be willing to buy and be capable of paying the price set by the supplier. It is demand backed by the necessary purchasing power.
3.2 Derived Demand
Derived demand occurs when one commodity is an essential part of another commodity and it is demanded not for its own sake. e.g. steel and cars.
3.3 Composite Demand
Composite demand occurs when a commodity is required for a number of different uses. e.g. sugar
3.4 Joint Demand
Joint demand occurs when the demand for one commodity is joined with the demand for another. Also called complementary goods. e.g. petrol and cars.
4 Movement or a Shift in a
4.1 A shift in the demand curve is caused
by a change in any non-price
determinant of demand
4.2 A movement in the demand curve is
caused by a change in the price of the
5 Factors Affecting the
Demand For a Good
5.1 Its own price
5.2 Price of other Goods
5.2.1 Substitute goods
5.2.2 Complementary Goods
5.3 Level of Income
A rise in income causes more normal goods to be demanded, while a fall in income leads to more inferior goods to be demanded.
5.4 Consumer Expectations
5.5 Consumer Tastes
5.6 Unplanned Factors
e.g. if there is a sudden heat wave, there would be an increase in the quantity demanded for sunscreen.
5.7 Government Regulations
e.g. the plastic bad levy is aimed to reduce consumption of plastic bags.
The smoking ban is aimed at curtailing tobacco consumption
6 Exceptions to the Law of Demand
6.1 Giffen Goods
Giffen Goods are goods with a positive price effect, i.e. more is bought as the price rises and less is bought as price falls
6.1.1 Bread, rice and potatoes
6.2 Snob Items
Some commodities are attractive to some buyers because of their exclusiveness or high price. A rise in price makes them more exclusive.
6.2.1 Yachts, sport cars and
6.3 Speculative Goods
e.g. if a person is considering buying stocks and shares, the possibility that prices are likely to be even higher in the future will stimulate and probably increase quantity demanded at current prices
6.4 Addictive Goods
Even when the price of the commodity increases, they will probably continue to purchase these goods and their demand for the commodity may actually increase because of their addiction.