D) The factors that may cause a shift in the demand curve: o changes in…

The idea

A shift in the demand curve occurs when non-price factors change, altering the quantity demanded at every price level. An outward shift represents increased demand, while an inward shift shows a decrease. Key factors include changes in the prices of related goods: if a substitute's price (e.g. coffee) rises, demand for tea shifts outwards; if a complement's price (e.g. printers) rises, demand for ink shifts inwards. Changes in real incomes affect purchasing power, shifting demand for normal goods outwards when incomes rise. Tastes, fashions, and successful advertising or branding campaigns increase consumer desire, shifting demand outwards. Finally, demographic changes, such as an increase in population size or an ageing population, shift demand for specific goods like healthcare.

What earns the marks

• Identify that a change in the price of a substitute good causes a shift in the demand curve for the related good in the same direction.
• Explain that an increase in real income shifts the demand curve for a normal good to the right, but shifts the demand curve for an inferior good to the left.
• Recognise that successful advertising and branding campaigns shift the demand curve outwards by increasing consumer loyalty and preference.
• Analyse how an ageing population shifts the demand curve for specific goods and services, such as retirement homes or mobility aids, to the right.

Common mistakes and how to put them right

• Confusing a movement along the demand curve with a shift.

  Put it right: A movement is caused only by a change in the good's own price, whereas a shift is caused by non-price factors.

• Assuming an increase in income always increases demand.

  Put it right: This is only true for normal goods, whereas demand for inferior goods will decrease.

• Misidentifying the relationship between complementary goods.

  Put it right: An increase in the price of a complement causes a decrease in demand for the related good, not an increase.

Exam tips

• Always specify whether a shift in the demand curve is outwards (to the right) or inwards (to the left) rather than just stating that demand changes.
• When evaluating the impact of advertising, consider that its effectiveness in shifting demand depends on the elasticity of the product and competitor actions.
• Use specific demographic examples, such as the UK's ageing population, to contextualise how changes in age distribution affect demand for particular markets.