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Business_A-level_Edexcel

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  1. 1-marketing-and-people

    1-1-meeting-customer-needs
    3 主题
  2. 1-2-market
    5 主题
  3. 1-3-marketing-mix-and-strategy
    5 主题
  4. 1-4-managing-people
    5 主题
  5. 1-5-entrepreneurs-and-leaders
    6 主题
  6. 2-managing-business-activities
    2-1-raising-finance
    4 主题
  7. 2-2-financial-planning
    4 主题
  8. 2-3-managing-finance
    3 主题
  9. 2-4-resource-management
    4 主题
  10. 2-5-external-influences
    3 主题
  11. 3-business-decisions-and-strategy
    3-1-business-objectives-and-strategy
    4 主题
  12. 3-2-business-growth
    4 主题
  13. 3-3-decision-making-techniques
    4 主题
  14. 3-4-influences-on-business-decisions
    4 主题
  15. 3-5-assessing-competitiveness
    3 主题
  16. 3-6-managing-change
    3 主题
  17. 4-global-business
    4-1-globalisation
    5 主题
  18. 4-2-global-markets-and-business-expansion
    5 主题
  19. 4-3-global-marketing
    3 主题
  20. 4-4-global-industries-and-multinational-corporations
    3 主题
  21. 5-exam-technique
    5-1-the-exam-papers
    4 主题
  22. 5-2-business-studies-skills
    1 主题
  23. 5-3-structuring-your-responses
    5 主题
  24. 6-pre-release-preparation
    2025-pre-release-music-industry
    9 主题
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An introduction to demand

  • Demand refers to the number of goods/services customers are willing to buy at a given price

    • Effective demand occurs when customers are willing and able (they have the money) to buy at a given price

  • There is an inverse relationship between the quantity demanded by customers and the price 

    • As the price increases, the quantity demanded decreases

    • As the price decreases, the quantity demanded increases

    • Hence, the demand curve slopes downwards from left to right

  • This is illustrated in the diagram below

A simple demand curve

Graph showing a demand curve with the price on the vertical axis and the quantity on the horizontal axis. Points A, B and C indicate demand changes.
A demand curve showing how a change in price will lead to a change in quantity demanded (QD)

Diagram analysis

  • An increase in price from £10 to £15 leads to a movement up the demand curve from point A to point B

    • Due to the increase in price, the quantity demanded (QD) has fallen from 10 to 7 units

  • 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

Examiner Tips and Tricks

When writing about a movement along the demand curve, we use the term “quantity demanded“.

Factors leading to a change in demand

  • A change in price leads to a movement along the demand curve

  • However, a change in any other factors affecting demand will shift the entire demand curve to the left or right

    • These are called “non-price factors affecting demand“

Non-price factors affecting demand

Diagram showing non-price factors affecting demand, including fashion changes, goods prices, advertising, income changes, seasonality, shocks and demographics.
The non-price factors affecting demand result in a shift of the entire demand curve

  • For example, if a firm increases its 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

Changes in non-price factors

Graph showing the demand curve shifts. Axes are labelled "Price (£)" and "Quantity". Initial curve D shifts right from D2 through D to D1, with the price marked at 7.
A change in any non-price factor will lead to a change in the position of the demand curve

Diagram analysis

  • The initial demand curve is seen at D

    • At a price of £7, 15 units are demanded

  • If the price remains constant at £7 but demand decreases due to one of the non-price factors of demand (e.g. decreasing incomes), the entire demand curve shifts to the left, from D to D2

    • Demand has decreased from 15 units to 5 units

  • If the price remains constant at £10 but demand increases due to one of the non-price factors of demand (e.g. increased advertising expenditure), the entire demand curve shifts to the right, from D to D1

    • Demand has increased from 15 units to 25 units

Non-price factors affecting demand

Non-price factor

Explanation

Example

Change in the price of substitutes

  • Substitute goods are replacement goods (e.g. different car brands)

  • If the price of VW cars increases, demand for Ford cars might rise

  • This shifts the demand curve for Ford cars to the right

Change in the price of complementary goods 

  • Complementary goods are goods that are consumed together 

  • Cars and petrol: If the price of petrol rises, the demand for cars may fall

  • This shifts the demand curve for cars to the left

Change in consumer incomes

  • As a consumer’s income rises, demand for normal goods) increases

  • Demand for branded goods (e.g. Superdry hoodies) tends to increase as consumer incomes rise

  • This shifts the demand curve for branded goods to the right

  • As a consumer’s income falls, demand for inferior goods increases

  • Demand for own-label products (e.g. supermarket hoodies) tends to rise as consumer incomes fall

  • This shifts the demand curve for own-label goods to the right

Fashions, tastes and preferences

  • If products become more fashionable, demand for them increases

  • Plant-based foods have become more popular in recent years

  • This has shifted the demand curve for plant-based foods to the right

Advertising and branding

  • If more money is spent on advertising or branding, then this increases consumer awareness and brand loyalty

  • Coca-Cola spends an average of $4bn per year on advertising and branding

  • This shifts Coca-Cola’s demand curve to the right and makes demand more price inelastic

Demographics

  • If the structure or size of a country’s population changes, then the demand for products will also change

  • A decrease in the number of babies being born will reduce the demand for baby products

  • This shifts the demand curve for baby products to the left

Seasonality

  • Demand varies at different times of the year

  • In cold climates, the demand for gas and electricity falls in the summer months

  • This shifts the demand curve for energy to the left

External shocks

  • An unexpected event can change the demand

  • The outbreak of Covid-19 led to panic buying of goods such as toilet rolls 

  • This shifted the demand curve for toilet rolls to the right

Examiner Tips and Tricks

Remember, a change in any non-price factor that leads to less demand will shift the entire demand curve to the left, but a change in any non-price factor that leads to more demand will shift the entire demand curve to the right.

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