Demand — Edexcel A-Level Business
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Demand explained
Everything except the good's own price sits in the conditions of demand, and when one of them moves the whole curve shifts right or left.
Read the full explanation
Rising real incomes lift normal goods and depress inferior ones, a cheaper rival brand pulls buyers away, a cheaper complement such as fuel pulls sales of large cars up, a campaign or a viral trend moves preferences, an ageing population reshapes what sells, weather and pandemics arrive unannounced, and many markets simply run to a calendar. For a business this is the sales forecast in disguise: it drives capacity, staffing and inventory, and it separates the causes management can influence, such as branding, from those it can only plan around.
Your focus
- Identify the factors that lead to a shift in the demand curve.
- Explain how changes in the prices of substitutes and complementary goods affect demand.
- Distinguish between a shift in the demand curve and a movement along it.
Demand exam tips
Marking Points
- Identifying which factor from the specification has caused a shift in the demand curve in a given scenario.
- Determining the direction of the demand curve shift (left or right) resulting from changes in incomes, tastes, or prices of related goods.
- Recognising the difference between a movement along the demand curve (caused by own price) and a shift (caused by other factors).
- Evaluating how external shocks, seasonality, or demographic changes impact the quantity demanded at any given price.
Examiner Tips
- 💡Always check if the scenario describes a change in the product's own price or an external factor to decide between a movement and a shift.
- 💡Pay close attention to whether a related good is a substitute or a complement, as this reverses the direction of the demand shift.
- 💡Use the specific terminology from the specification, such as 'external shocks' or 'demographics', when identifying the cause of a demand change.
Common Mistakes
- Claiming that a change in the product's own price shifts the demand curve, when it actually causes a movement along the existing curve.
- Assuming demand always rises with income, which fails for inferior goods where income elasticity of demand is negative.
- Confusing substitutes with complementary goods when analysing the impact of a related product's price change.