Syllabus points
- Explain the law of demand and the shape of the demand curve.
- Distinguish a movement along from a shift of the demand curve.
- Explain the non-price determinants of demand.
- (HL) Explain demand using the assumptions of utility.
The law of demand
Demand is the quantity of a good consumers are willing and able to buy at each price over a period of time. The law of demand states that, *ceteris paribus*, as price rises quantity demanded falls, and as price falls quantity demanded rises. The demand curve therefore slopes downwards.
Two reasons explain the negative slope:
- Income effect — a lower price raises real purchasing power, so consumers can buy more.
- Substitution effect — a lower price makes the good cheaper relative to substitutes, so consumers switch towards it.
Key definitions
| Term | Exam-ready definition |
|---|---|
| Demand | The quantity consumers are willing and able to buy at each price. |
| Law of demand | As price rises, quantity demanded falls, *ceteris paribus*. |
| Movement along | A change in quantity demanded caused only by the good's own price. |
| Shift | A change in demand at every price caused by a non-price factor. |
Movement along versus a shift
This distinction earns easy marks and is often confused.
- A change in the good's own price causes a movement along the curve (a change in *quantity demanded*).
- A change in a non-price determinant shifts the whole curve left or right (a change in *demand*).
Non-price determinants of demand
Remember them with income, related goods, tastes, and the market size:
- Income — for a normal good, higher income raises demand; for an inferior good it lowers demand.
- Price of substitutes — a dearer substitute raises demand for this good.
- Price of complements — a dearer complement lowers demand for this good.
- Tastes and preferences — advertising, trends and health information.
- Number of consumers — population or market access.
- Future expectations — expecting higher prices later raises demand now.
Worked example
The price of petrol rises sharply. Because petrol and large cars are complements, the demand curve for large cars shifts left — at every price, fewer are demanded. Note this is a *shift* (a non-price factor for cars), not a movement along the car demand curve.
Common exam mistakes
- Calling a shift a "movement" (or vice versa).
- Saying a price change "increases demand" — a price change changes *quantity demanded*.
- Forgetting to state *ceteris paribus*.
Exam technique
Always label diagrams fully (axes, curves D1→D2, price and quantity). State the *cause* of a shift explicitly and trace the effect on equilibrium price and quantity (links to 2.3).
Quick revision
- Demand curve slopes down (income + substitution effects).
- Own price → movement along; other factors → shift.
- Determinants: income, substitutes, complements, tastes, number of buyers, expectations.