Definition of demand
2.2 – Demand (Allocation of Resources)
2.2.1 Definition of Demand
In economics, demand is the quantity of a good or service that consumers are willing and able to purchase at a series of prices, during a specified time‑period, ceteris paribus (all other factors remaining unchanged).
- Willingness to buy – the desire to obtain the good.
- Ability to buy – having sufficient income, wealth or credit.
- Time period – the interval over which the demand is measured (e.g., per week, per month).
Individual demand and market demand
Each consumer has an individual demand curve, which shows the quantities that that person would buy at different prices, holding everything else constant.
The market demand curve is obtained by horizontal summation of all individual demand curves – i.e. adding the quantities demanded by every consumer at each price:
\$Q{\text{market}}(P)=\sum{i=1}^{n} Q_i(P)\$
Example: If three consumers would each buy 2, 5 and 3 units of a product when the price is £4, the market quantity demanded at £4 is 2 + 5 + 3 = 10 units.
2.2.2 The Demand Diagram
Law of demand
The law of demand states that, ceteris paribus, a lower price leads to a higher quantity demanded, and a higher price leads to a lower quantity demanded. This relationship is represented by a downward‑sloping demand curve.
How to draw a demand curve (step‑by‑step)
- Draw a set of perpendicular axes.
- Label the vertical axis Price (P) and the horizontal axis Quantity demanded (Q).
- Mark the price intercept (the price at which quantity demanded would be zero) on the price axis.
- Mark the quantity intercept (the quantity demanded when price is zero) on the quantity axis.
- Connect the two intercepts with a smooth, straight or gently curved line that slopes downwards from left to right.
- Label the curve D (for demand).
Movement along the demand curve – extension / contraction
- Extension of demand – a fall in the good’s own price causes a movement down the curve to a higher quantity demanded.
- Contraction of demand – a rise in the good’s own price causes a movement up the curve to a lower quantity demanded.
These movements are caused only by a change in the price of the good itself (ceteris paribus).
Shifts of the demand curve – increase / decrease
- Increase in demand (right‑hand shift) – at every price, a larger quantity is demanded.
- Decrease in demand (left‑hand shift) – at every price, a smaller quantity is demanded.
Shifts occur when any of the non‑price determinants of demand change (see 2.2.3).
2.2.3 Determinants of Demand (Shifters)
Factors other than the price of the good itself that shift the whole demand curve.
| Determinant | Effect on demand | IGCSE‑style example |
|---|---|---|
| Consumer income |
| When students receive a larger weekly allowance, demand for new video games (a normal good) increases, while demand for second‑hand textbooks (an inferior good) may fall. |
| Prices of related goods |
| If the price of coffee rises, demand for tea (a substitute) increases. If printer‑ink prices rise, demand for printers (a complement) falls. |
| Consumer tastes and preferences | Favourable change → demand rises; unfavourable change → demand falls. | A health campaign promoting low‑fat yoghurt reduces demand for full‑fat yoghurt. |
| Expectations of future prices |
| If shoppers expect smartphones to be cheaper next month, they postpone purchases, reducing present demand. |
| Number of buyers | More buyers → demand increases; fewer buyers → demand decreases. | The opening of a new university campus adds many students, shifting the demand for bicycles to the right. |
2.2.4 Link to the Next Topic
Understanding the definition of demand, the demand diagram, and the factors that shift it provides the foundation for analysing how a change in price leads to a movement along the curve. The size of that response is measured by the price elasticity of demand, which is studied in the next section of the Cambridge IGCSE 0455 syllabus.
2.2.5 Summary
- Demand = quantity consumers are willing and able to buy at different prices, ceteris paribus, over a given time‑period.
- Individual demand curves are added horizontally to give the market demand curve.
- The demand diagram shows price on the vertical axis, quantity on the horizontal axis, and a downward‑sloping line (law of demand).
- Changes in the good’s own price cause movements along the curve (extension or contraction).
- Changes in income, related‑good prices, tastes, expectations, or the number of buyers shift the whole curve (increase = right‑shift, decrease = left‑shift).
- These concepts prepare you for the study of price elasticity of demand.