The quantity of a good or service that consumers are able and willing to buy at a given price during a given period of time
Demand varies with price
The lower the price, the more affordable the good and so consumer demand increases
Movements along the demand curve
1. At price P1, a quantity of Q1 is demanded
2. At the lower price of P2, a larger quantity of Q2 is demanded (expansion of demand)
3. At the higher price of P3, a lower quantity of Q3 is demanded (contraction of demand)
Only changes in price will cause movements along the demand curve
Shifting the demand curve
1. Price changes do not shift the demand curve
2. A shift from D1 to D2 is an inward shift in demand, so a lower quantity of goods is demanded at the market price of P1
3. A shift from D1 to D3 is an outward shift in demand, more goods are demanded at the market price of P1
Factors that shift the demand curve (PIRATES)
Population
Income
Related goods
Advertising
Tastes and fashions
Expectations
Seasons
Derived demand
The demand for one good is linked to the demand for a related good
Composite demand
The good demanded has more than one use
Joint demand
Goods are bought together
Diminishing marginal utility
As an extra unit of the good is consumed, the marginal utility, i.e. the benefit derived from consuming the good, falls. Therefore, consumers are willing to pay less for the good.
The demand curve is downward sloping, showing the inverse relationship between price and quantity
