Economics for Cambridge IGCSE Ye Dipa Hein, PhD
Demand
Definition of demand
Demand is defined as the willingness and ability to buy a product at a given price at a
given period of time.
There is an inverse relationship between the quantity demanded by customers and the
price.
As the price increases, the quantity demanded decreases. Quantity demand: the
amount of a good or
As price decreases, the quantity of demanded increases.
service demanded at
Hence the demand curve slopes downwards from left to right. each price level
hD
Price and demand
Movements along a demand curve
,P
Movements along a demand curve result
from changes in prices only. All other
possible influences are assumed to be held
constant.
N
EI
• A contraction of demand occurs when
the price rises and there is a decrease in
H
the quantity demanded
• A extension of demand occurs when the
A
price falls and there is an increase in the
quantity demanded.
IP
Conditions of demand
D
A changes in price leads to a movement along the demand curve.
However, a change in any other factors affecting demand will shift the entire demand
E
curve to the left or right.
Y
These are called non-price factors affecting demand.
Changes in demand: shifts in the demand curve.
Increase in demand: a rise in demand at any given price, causing
the demand curve to shift to the right.
Decrease in demand: a fall in demand at any given price, causing
the demand curve to shift to the left.
Normal goods: a product whose demand
increases when income increases and
Substitute: a product that can be used in place
decreases when income falls.
of another.
Inferior goods: a product whose demand
Complement: a product that is used together
decreases when income increases and
with another product.
increases when income falls.
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Economics for Cambridge IGCSE Ye Dipa Hein, PhD
The factors that can influence the demand for a product, other than price, including the
following.
hD
,P
N
EI
H
A
IP
Individual and market demand
Individual demand is the quantity of a product an individual would be willing and be able to
D
buy at different prices.
Market demand refers to the aggregation of all individual demand for a particular product.
E
Y
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Economics for Cambridge IGCSE Ye Dipa Hein, PhD
The World Trade Organization (WTO) estimates that India has the largest levels of trade
protection of any major economy. The highest tariffs are imposed on products from the
primary sector. For example, in 2018 India imposed a tariff of approximately 90% on imports
of coffee to protect its coffee farmers. However, the markets for coffee substitutes and
complements do not have such levels of government intervention. [0455/21/O/N/24]
(b) Explain how the price of coffee substitutes and complements can affect the demand for
coffee. [4]
………
hD
The number of Chinese restaurants in the UK fell by approximately 7% in 2020 compared to
the year before. Reasons for this include falling demand for Chinese food and increasing
competition from other types of food. Some small firms selling Chinese food are also
,P
unwilling to invest in the latest technology because of the possible opportunity costs.
[0455/23/M/J/23]
N
EI
(c) Analyse two causes of a fall in demand for a product such as Chinese food. [6]
H
………
In 2019, 70% of Swedish workers were members of a trade union. More than 85% of
A
Swedish workers are employed in the tertiary sector, compared with only 2% in the primary
IP
sector. Swedish workers spend their incomes on a variety of products some of which, e.g.
sweets, are demerit goods. Sweden has the 7th highest per head consumption of sweets in
D
the world. [0455/21/M/J/22]
E
(a) Identify two influences on what products a person buys. [2]
Y
………
Global spending on the health sector, by both the private and public sectors, is the highest
compared with all other sectors including education and defence. Investment in education
and the health sector has resulted in new life-saving technology being introduced. However,
demand for certain vaccinations has decreased over the years, shifting the demand curve of
vaccinations to the left. [0455/23/M/J/21]
(b) Explain two causes of a shift to the right in the demand curve to the left. [4]
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Economics for Cambridge IGCSE Ye Dipa Hein, PhD
There is an area of rubbish, three times the size of France, floating in the Pacific Ocean
called the Great Pacific Garbage Patch. It is made up of rubbish including old fishing nets
but most is plastic waste. It is forecast that, by 2050, there will be more plastic in the Pacific
Ocean than fish. A number of islands in the Pacific Ocean specialise in fishing. Greater
pollution will increase the social cost of the fishing industry. [0455/21/M/J/21]
(b) Explain two causes of a shift to the right in the demand curve for fish. [4]
………
hD
The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables
than most Europeans and more food types that may be considered to be demerit goods. In
2017, the Hungarian government introduced a tax on unhealthy food, known as the chips
,P
tax. The tax has had some success in moving demand to healthier foods. Some economists
suggest that governments should use price controls as well as taxes to influence the food
market.
N [0455/22/O/N/20]
EI
(b) Explain the difference between an extension in demand and an increase in demand. [4]
H
……….
A
There is a high level of division of labour in the United Kingdom (UK) energy industry. Cold
IP
weather in early 2018 caused very high demand for energy and a change in its price. This led
to a temporary shortage of energy for firms and households in the UK. Part of the change in
D
price may have been the result of UK energy firms abusing their monopoly power. This would
be an example of market failure. [0455/23/M/J/20]
E
(b) Explain two influences, other than weather, that could affect the demand for a product.
Y
[4]
……..
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Economics for Cambridge IGCSE Ye Dipa Hein, PhD
In 2017, the Brazilian paper industry was booming. Its total revenue increased and it
employed both more, and better quality, factors of production. Brazil’s largest paper
producer merged with an Indonesian paper-producing firm at the end of 2017. The
performance of Brazil’s coffee industry differed from its paper industry. Brazilian coffee
experienced a fall in demand and a fall in total revenue. [0455/22/F/M/20]
(d) Discuss whether or not demand for coffee is likely to rise in the future. [8]
……….
hD
In October 2015, the Chinese government switched from its one child policy to a two child
policy partly because of the challenges caused by an ageing population. The birth rate was
falling anyway due to rising female participation in the labour force, improvements in
,P
education, later marriages and the rapidly rising price of housing. [0455/22/M/J/18]
N
(b) Explain why the price of housing may increase. [4]
EI
……….
H
In the UK, bus journeys outside London have fallen by nearly 40% since 1980. This fall in
demand has been largely due to a rise in bus fares, a rise in income and changes in the price
A
and quality of substitutes. On some routes there are monopolies operating and this lack of
IP
competition can push up the price. [0455/22/M/J/18]
D
(a) Define a substitute and give an example. [2]
E
……….
Y
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