Edexcel A Level Economics A:復習筆記1.2.2 Demand

Category: A-level課程, 教材筆記, 福利干貨 Date: 2022年9月26日下午3:22

Demand

Demand?is the amount of a good/service that a consumer is willing and able to purchase at a given price in a given time period
- If a consumer is willing to purchase a good, but cannot afford to, it is not?effective demand
A?demand curve?is a graphical representation of the?price?and?quantity demanded (QD)?by consumers
- If data were plotted, it would be an?actual curve, however economists?simplify curves?in their sketches into?straight lines?so as to make analysis easier

Movements Along A Demand Curve

If?price?is the only factor that changes (ceteris paribus), there will be a change in the?QD
- This change is shown by a?movement along the demand curve

L44o4OxC_1-2-2-movement-along-demand-curve_edexcel-al-economics

A demand curve showing a contraction in quantity demanded (QD) as prices increase and an extension in quantity demanded (QD) as prices decrease

Diagram Analysis

An?increase?in price from ￡10 to ￡15 leads to a movement?up?the demand curve from point A to B
- Due to the?increase?in price, the QD has?fallen?from 10 to 7 units
- This movement is called a?contraction?in QD
A?decrease?in price from ￡10 to ￡5 leads to a movement?down?the demand curve from point A to point C
- Due to the?decrease?in price, the QD has?increased?from 10 to 15 units
- This movement is called an?extension?in QD
The?law of demand?captures this fundamental relationship between price and QD
- It states that?there is an inverse relationship between price and QD
  - When price rises the QD falls
  - When prices fall the QD rises
This relationship partly explains why the?demand curve?is downward sloping

Conditions of Demand

Shifts Of The Entire Demand Curve

There are numerous factors that will?change the demand?for a good/service,?irrespective of the price level. Collectively these factors are called the?conditions of demand
Changes to each of the conditions of demand,?shifts the entire demand curve?(as opposed to a movement along the demand curve)

1-2-2-shifts-in-the-demand-curve_edexcel-al-economics

A graph that shows how changes to any of the conditions of demand shifts the entire demand curve left or right, irrespective of the price level

For example, if a firm?increases?their?Instagram advertising, there will be an?increase in demand?as more consumers become aware of the product
- This is a?shift in demand?from D to D1. The price remains unchanged at ￡7 but the?demand has increased?from 15 to 25 units

An Explanation of How Each of the Conditions of Demand Shifts the Entire Demand
Curve at Every Price Level

Condition	Explanation	Condition	Shift	Condition	Shift
Changes in Real Income	Real Income?determines how many goods/services can be enjoyed by consumers There is a?direct?relationship between income and demand for?normal goods	Income Increases	D Shifts Right (D→D1)	Income Decreases	D Shifts Left (D→D2)
Changes in taste/fashion	If goods/services become more?fashionable?then?demand?for them increases There is a?direct relationship?between changes in?taste/fashion?and?demand	Good becomes more fashionable	D Shifts Right (D→D1)	Good becomes less fashionable	?D Shifts Left (D→D2)
Advertising/ branding	If more money is spent on?advertising?or?branding, then demand for goods/services will increase as more consumers are aware of the product There is a?direct?relationship between?branding/advertising?and?demand	Advertising Increases	D Shifts Right (D→D1)	Advertising Decreases	?D Shifts Left (D→D2)
Changes in the prices of substitute goods	Changes in the price of?substitute goods?will influence the demand for a product/service There is a?direct relationship?between the?price of good A?and?demand for good B For example, the price of a Sony 60" TV increases so the?demand?for LG 60" TV increases	Price of Good A Increases	D for Good B Shifts Right (D→D1)	Price of Good A Decreases	D for Good B Shifts Left (D→D2)
Changes in the prices of complementary goods	Changes in the price of?complementary?goods?will influence the demand for a product/service There is an?inverse relationship?between the?price of good A?and?demand for good B For example, the price of printer ink increases so the?demand?for ink printers decreases	Price of Good A Increases	D for Good B Shifts Left (D→D2)	Price of Good A Decreases	D for Good B Shifts Right (D→D1)
Changes in population size/distribution	If the?population size?of a country changes over time, then the?demand?for goods/services will also change There is a?direct relationship?between the changes in population size and demand Demand will also change if there is a change to the?age distribution?in a country as different ages?demand different goods/services?e.g an ageing population will buy more hearing aids	Population Increases	D Shifts Right (D→D1)	Population Decreases	?D Shifts Left (D→D2)

Exam Tip

The difference between a?movement along the demand curve?and a?shift in demand?is essential to understand. You will be repeatedly examined on this and it is important that you use the?correct language?to show that you understand the difference between?a change in quantity demanded?and a?change in demand.

When?price changes?(ceteris paribus), there is a movement along the demand curve resulting in a change to?quantity demanded. When a?condition of demand changes,?there is a shift of the entire demand curve resulting in a?change to demand.

Diminishing Marginal Utility

Marginal utility?is the additional utility?(satisfaction)?gained from the consumption of?an additional product
The utility gained from consuming the first unit is usually?higher?than the utility gained from?consuming the next unit
- For example, a hungry consumer gains?high utility?from eating their?first hamburger. They are still hungry and purchase a?second hamburger?but gain?less satisfaction?from eating it than they did from the first hamburger
To calculate?total utility, the?marginal utility of each unit?consumed is?added together
- This means that total utility?keeps increasing?even while marginal utility?is decreasing
The Law of Diminishing Marginal Utility?states that as additional products are consumed, the utility gained from the next unit?is lower than the utility gained from the?previous unit
The Law of Diminishing Marginal Utility?helps to explain the reason why the demand curve is?downward sloping
- When the first unit is purchased, the?utility is high?and consumers are willing to pay a?high price
- When subsequent units are purchased, each one offers?less utility?and the willingness of the consumer to pay the initial price decreases
- Lowering the price?makes it a more attractive proposition for the consumer to?keep consuming?additional units
- This is one reason why?firms offer discounts?such as '50% off the second item'