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What determines how much of a good consumers want to buy at each price?

The law of demand, why the demand curve slopes downwards, movements along versus shifts of demand, and the factors that shift demand.

An OCR J205 answer on the law of demand, the downward-sloping demand curve, movements versus shifts, and the non-price factors that shift demand.

Generated by Claude Opus 4.89 min answer

Reviewed by: AI editorial process; not yet individually human-reviewed

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  1. What this dot point is asking
  2. The law of demand
  3. Movements along the demand curve
  4. Shifts of the demand curve
  5. Substitutes and complements
  6. Worked diagram example
  7. Try this

What this dot point is asking

OCR 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. The demand and supply diagram underpins much of J205/01, so labelling axes and shifting 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 mean a lower price is linked to a higher quantity demanded.

On a diagram, price PP goes on the vertical axis and quantity QQ on the horizontal axis. A typical demand relationship might be written Qd=100−2PQ_d = 100 - 2P: at a price of £10\pounds 10, quantity demanded is Qd=100−2×10=80Q_d = 100 - 2 \times 10 = 80; at £20\pounds 20 it falls to Qd=100−2×20=60Q_d = 100 - 2 \times 20 = 60, confirming the downward slope.

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). The main factors OCR 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 OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

OCR J205/01 20194 marksExplain the difference between a movement along a demand curve and a shift of the demand curve.
Show worked answer →

A 4 mark Explain question. A movement along the demand curve happens only when the price of the good itself changes: a fall in price causes an extension (more demanded) and a rise causes a contraction (less demanded). The curve does not move.

A shift happens when a non-price factor changes, such as income, the price of related goods, tastes or advertising. The whole curve moves right for an increase or left for a decrease.

Markers reward the clear rule that price changes cause movements while non-price factors cause shifts, ideally with an example of each.

OCR J205/01 20226 marksDiscuss the likely effect on the demand for cinema tickets of a fall in the price of home streaming subscriptions and a rise in average incomes.
Show worked answer →

A 6 mark question needing two shifts and a judgement.

Streaming is a substitute for cinema, so a fall in its price makes it relatively cheaper and shifts the demand curve for cinema tickets to the left (a fall in demand). At the same time, cinema visits are normally a normal good, 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 streaming is. 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 streaming quality rises.

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