IGCSEEconomicsCIERevision Notes2. The Allocation of Resources2.3 Demand2.3.2 Conditions of Demand

Conditions of Demand (CIE IGCSE Economics)

Revision Note

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Shifts of the Demand Curve

  • There are numerous factors that will change the demand for a good/service, irrespective of the price level. Collectively these factors are called the conditions of demand

  • Changes to each of the conditions of demand, shifts the entire demand curve (as opposed to a movement along the demand curve)

1-2-2-shifts-in-the-demand-curve_edexcel-al-economics

A graph that shows how changes to any of the conditions of demand shifts the entire demand curve left or right, irrespective of the price level

  • For example, if a firm increases their Instagram advertising, there will be an increase in demand as more consumers become aware of the product
    • This is a shift in demand from D to D1. The price remains unchanged at £7 but the demand has increased from 15 to 25 units

An Explanation of How Each of the Conditions of Demand Shifts the Entire Demand
Curve at Every Price Level


Condition


Explanation
Condition
Shift
Condition
Shift

Changes in Real Income

  • Real Income determines how many goods/services can be enjoyed by consumers
  • There is a direct relationship between income & demand for goods/services 

Income
Increases

D Increases
Shifts Right
(D→D1)

Income
Decreases

D Decreases
Shifts Left
(D→D2)

Changes in taste/fashion

  • If goods/services become more fashionable then demand for them increases
  • There is a direct relationship between changes in taste/fashion & demand

Good becomes more fashionable

D Increases
Shifts Right
(D→D1)

Good becomes less fashionable

D Decreases
Shifts Left
(D→D2)

Advertising/
branding

  • If more money is spent on advertising or branding, then demand for goods/services will increase as more consumers are aware of the product
  • There is a direct relationship between branding/advertising & demand

Advertising Increases

D Increases
Shifts Right
(D→D1)

Advertising Decreases

D Decreases
Shifts Left
(D→D2)

Changes in the prices of substitute goods

  • Changes in the price of substitute goods will influence the demand for a product/service
  • There is a direct relationship between the price of good A & demand for good B
  • For example, the price of a Sony 60" TV increases so the demand for LG 60" TV increases

Price of Good A Increases

D for
Good B
Increases
Shifts Right
(D→D1)

Price of Good A Decreases

D for
Good B Decreases
Shifts Left
(D→D2)

Changes in the prices of complementary goods

  • Changes in the price of complementary goods will influence the demand for a product/service
  • There is an inverse relationship between the price of good A & demand for good B
  • For example, the price of printer ink increases so the demand for ink printers decreases

Price of Good A Increases

D for
Good B Decreases
Shifts Left
(D→D2)

Price of Good A Decreases

D for
Good B
Increases
Shifts Right
(D→D1)

Changes in population size/distribution

  • If the population size of a country changes over time, then the demand for goods/services will also change
  • There is a direct relationship between the changes in population size & demand
  • Demand will also change if there is a change to the age distribution in a country as different ages demand different goods/services e.g an ageing population will buy more hearing aids

Population Increases

D Increases
Shifts Right
(D→D1)

Population Decreases

 D Decreases
Shifts Left
(D→D2)

Exam Tip

The difference between a movement along the demand curve and a shift in demand is essential to understand. You will be repeatedly examined on this and it is important that you use the correct language to show that you understand the difference between a change in quantity demanded and a change in demand.

When price changes (ceteris paribus), there is a movement along the demand curve resulting in a change to quantity demanded. When a condition of demand changes, there is a shift of the entire demand curve resulting in a change to demand.

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