Demand

AS Economics

Aims and Objectives

Aim: Understand how PPB curves can shift

Level

Objectives:
Define demand Draw an increase and decrease in demand

E-D C-B

B-A
A*

Analyse the factors influencing demand

Evaluate the effects consumer behaviour has on demand.

Starter
Draw a demand curve. On your diagram show an extension and contraction in demand.

Increases & Decreases in Demand: Shifts

Price

D2

D1

Shifts in demand related to consumers behaviour, not necessarily concerned with a price fall.

Q2

Q1 Qty Demanded

Factors Shifting Demand

In groups brainstorm all of the factors will either increase or decrease demand.

Demand Determinants

Incomes Price uncertainty Advertising

Laws

Demand Determinants

Prices of Substitutes

Weather

Price of Complementary Products

Quality

Fashion

1) Incomes
Rises in incomes will mean an increase in demand. This only applies to Normal Goods.

1) Incomes
Sometimes a rise in incomes will mean demand will fall for a good. This is known as an inferior good. Consumers trade up as their incomes rise.

Trade Up

2) Advertising
Successful advertising campaigns will increase demand. Consumers become more aware of the good/service. http://www.youtube.com/watch?v=GWnunavN4bQ http://www.youtube.com/watch?v=nf5-Prx19ZM

3) Prices of Substitutes
Substitute products are competing alternatives. E.g. X-Box and PlayStation If X-Box lowered its selling price, PlayStation would probably see a fall in its demand.

4) Prices of Complementary Products

Complementary products are goods that are demanded together. Eg. DVDs and DVD players. If the price of the complementary goods increases, the demand for the related product falls. E.g. Petrol Prices rising = fall in demand of 4x4 cars.

5) Fashion
Products that are in fashion will see demand increase.

6) Quality
If quality improves and price remains the same, demand will increase.

7) Weather
How might the weather affect demand for goods? Some products are seasonal, eg. Demand for ice cream is greater in summer, Christmas trees November. 2010 Big Freeze http://news.bbc.co.uk/1/hi/business/8453294.stm How may the Big Freeze have impacted on businesses? Was it bad for all businesses concerned?

8) Changes in Laws
Will influence demand in terms of encouraging/discouraging consumers to buy. 2007 smoking ban. 2013 cycling helmets? http://www.bbc.co.uk/news/uk-17635907 http://www.bbc.co.uk/news/uk-15134981 Do changes in the law work to contract demand or not?

8) Changes in Laws
Two Significant Points of Comparison

8) Changes in Laws
Two Significant Points of Comparison

8) Changes in Laws
Two Significant Points of Comparison

9) Uncertainty Over Future Prices

If consumers expect future prices to rise they may demand now and increase demand. E.g. Petrol 2012 http://www.bbc.co. uk/news/uk17545794

Composite Demand
A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose. Typically leading to a higher price. E.g. Steel being demanded for construction and car production.

Derived Demand
When the demand for one good or service comes from demand for another good or service. E.g. An increase in the demand for cars will increase the demand for steel and plastics.

Wallace & Gromit & Stinking Bishop

The latest Wallace and Gromit film caused a surge in demand for Stinking Bishop cheese. However, the businessman that owned it could not cater for the demand experienced, what may have happened to the demand curve/price for Stinking Bishop?