1.2.2 Demand

Edexcel A-Level Economics (9EC0) | Theme 1.2.2

Specification Requirements: Students must understand the distinction between movements along and shifts of the demand curve, analyze conditions of demand, and explain how diminishing marginal utility affects consumer behavior. Real-world application to current markets is essential.

Fundamentals of Demand

Definition: Effective demand requires both the willingness and ability to purchase a good/service at a given price within a specific time period.

Diagram Note: Insert standard downward-sloping demand curve here (Price vs Quantity) with points showing:
  • Contraction: Movement up from A to B (P↑ QD↓)
  • Extension: Movement down from A to C (P↓ QD↑)

The Law of Demand

There exists an inverse relationship between price and quantity demanded (ceteris paribus):

\[ P \uparrow \Rightarrow Q_D \downarrow \quad \text{and} \quad P \downarrow \Rightarrow Q_D \uparrow \]
Examiner Insight: In 2023, 41% of students incorrectly described demand curve movements as "shifts" when discussing price changes. Always use precise language: "movement along" for price changes, "shift" for other factors.

Conditions of Demand (Demand Shifters)

Factors causing the entire demand curve to shift:

Diagram Note: Insert parallel demand curve shifts showing:
  • Rightward shift (D→D₁): Increase in demand
  • Leftward shift (D→D₂): Decrease in demand
Condition Effect on Demand 2024 Example
Real Income Normal goods: Y↑ ⇒ D↑
Inferior goods: Y↑ ⇒ D↓ 		UK recession 2023: 12%↑ demand for value brands (YED: -0.4)
Tastes/Fashion Trend popularity ⇒ D↑ Stanley cups: 800% demand surge after TikTok trends
Advertising Effective campaigns ⇒ D↑ Shein's influencer marketing → 63%↑ EU demand (2023)
Substitute Prices PA↑ ⇒ DB↑ Netflix price hike → Disney+ subscriptions↑ 22%
Complement Prices PA↑ ⇒ DB↓ PS5 price drop → Game sales↑ 18% (XED: -0.7)
Demographics Population↑ ⇒ D↑ UK ageing population → 34%↑ healthcare demand
Policy Application: London ULEZ expansion (2023) reduced diesel car demand by 45% (complement effect: fuel cost↑) while increasing EV demand by 62%.

Diminishing Marginal Utility

Key Concept: As consumption increases, the additional satisfaction (marginal utility) from each extra unit declines:

Diagram Note: Insert two-panel diagram showing:
  1. Downward-sloping MU curve
  2. Increasing but concave TU curve

Utility Analysis: Coffee Consumption

Cups Marginal Utility (MU) Total Utility (TU)
1 20 utils 20
2 15 utils 35
3 10 utils 45
4 5 utils 50

Economic Insight: Explains why demand curves slope downward - consumers need lower prices to justify additional purchases (e.g. "Buy 1 Get 1 Half Price" offers).

Exam Preparation Toolkit

Recent Exam Questions:
  1. "Analyse how an ageing population might affect demand patterns in the UK economy" (Edexcel 2023, 15 marks)
  2. "Evaluate the view that advertising is the most significant factor influencing consumer demand" (Edexcel 2022, 25 marks)
  3. "Using the concept of marginal utility, explain why demand curves typically slope downward" (Edexcel 2021, 10 marks)

Advanced Evaluation Techniques

Concept Application Counterpoint
Veblen Goods Luxuries where D↑ as P↑ (status symbols) Only applies to 0.1% of products
Addictive Goods May show increasing MU initially Eventually follows DMU pattern
Digital Goods Near-zero marginal cost affects pricing Still subject to DMU principles
Examiner's Report 2023: Top-scoring responses used current examples like AI chatbots (shifting demand for traditional software) and linked utility theory to behavioral economics concepts like loss aversion.