What determines how much of a good consumers want to buy?
The law of demand, why the demand curve slopes downwards, the difference between a movement along and a shift of demand, and the factors that shift demand.
A focused answer for AQA GCSE Economics on the law of demand, the downward-sloping demand curve, movements versus shifts, and the non-price factors that shift demand.
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What this dot point is asking
AQA wants you to state the law of demand, explain why the demand curve slopes downwards, distinguish a movement along the curve from a shift of the whole curve, and list the non-price factors that shift demand. Demand and supply diagrams underpin much of Paper 1, so being able to label axes ( on the vertical, on the horizontal) and shift the curve the right way is essential.
The law of demand
The demand curve slopes downwards from left to right for two linked reasons. First, the income effect: as a price falls, the good takes up less of a consumer's budget, so they can afford more. Second, the substitution effect: as a price falls, the good becomes cheaper relative to alternatives, so buyers switch towards it. Both effects mean a lower price is associated with a higher quantity demanded.
Movements along the demand curve
A change in the price of the good itself causes a movement along the curve:
- A fall in price causes an extension of demand (quantity demanded rises).
- A rise in price causes a contraction of demand (quantity demanded falls).
Shifts of the demand curve
A change in a non-price factor shifts the whole curve. Demand shifts right (an increase, more demanded at every price) or left (a decrease) for reasons that can be remembered with PIRATES: Population, Income, Related goods, Advertising and tastes, That is, fashion, Expectations and Seasons. The main ones AQA expects are:
- Income: higher income raises demand for normal goods and lowers demand for inferior goods (such as supermarket value ranges).
- Price of substitutes: if a rival good gets dearer, demand for this good rises.
- Price of complements: if a good used alongside this one gets dearer, demand falls.
- Tastes, fashion and advertising: trends or successful campaigns raise demand.
- Population and demographics: a larger or ageing population changes demand.
- Expectations: if buyers expect prices to rise soon, current demand rises.
Substitutes and complements
Worked diagram example
Try this
Q1. State the law of demand. [2 marks]
- Cue. As price rises, quantity demanded falls, other things being equal.
Q2. Explain one factor that would shift the demand curve for coffee to the right. [3 marks]
- Cue. A rise in the price of tea (a substitute) makes coffee relatively cheaper, raising its demand.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20186 marksExplain the difference between a movement along a demand curve and a shift in the demand curve.Show worked answer →
A movement along the demand curve happens only when the price of the good itself changes. A fall in price causes an extension of demand (more is bought) and a rise in price causes a contraction (less is bought). The curve does not move.
A shift of the demand curve happens when a non-price factor changes, such as income, the price of substitutes or complements, tastes, or advertising. The whole curve moves to the right for an increase in demand and to the left for a decrease.
A 6 mark answer states clearly that price changes cause movements while everything else causes shifts, develops each with an example, and ideally refers to a labelled diagram.
AQA 20229 marksDiscuss the likely effects on the demand for new petrol cars of a fall in the price of electric cars and a rise in average incomes.Show worked answer →
This is an extended-response question, so develop chains of reasoning and reach a judgement.
Electric cars are a substitute for petrol cars, so a fall in their price makes them relatively cheaper and shifts the demand curve for petrol cars to the left (a fall in demand). At the same time, cars are usually normal goods, so higher incomes shift demand to the right.
The two forces pull in opposite directions, so the net effect depends on their relative size and on how close a substitute electric cars are. Markers reward use of substitutes and normal goods, the correct shift directions, and a supported judgement (for example that the substitute effect may dominate as electric ranges improve).
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Sources & how we know this
- AQA GCSE Economics (8136) specification — AQA (2017)