Introduction

Demand is one of the most fundamental concepts in economics. It explains how consumers decide what goods and services to buy at different prices.

Students studying Cambridge O Level Economics 2281 and Cambridge IGCSE Economics 0455 must understand demand because it plays a key role in determining prices in a market economy.

Demand works together with supply to determine the equilibrium price and quantity of goods in a market.

What is Demand?

Demand refers to:

The quantity of a good or service that consumers are willing and able to buy at different prices during a given period of time.

Two important conditions must be met for demand to exist:

1. Consumers must want the product

2. Consumers must be able to afford the product

If a person wants something but cannot afford it, it does not count as demand in economics.

The Law of Demand

The law of demand states that:

When the price of a good increases, the quantity demanded decreases.

When the price decreases, the quantity demanded increases.

This happens because consumers usually prefer to buy goods at lower prices.

Demand Curve

Demand is usually illustrated using a demand curve diagram.

A demand curve shows the relationship between:

• Price

• Quantity demanded

The demand curve typically slopes downward from left to right.

This downward slope reflects the law of demand.

Individual Demand vs Market Demand

Individual Demand

Individual demand refers to the demand for a product by one consumer.

Market Demand

Market demand refers to the total demand from all consumers in the market.

Market demand is calculated by adding together the demand of all individual consumers.

Factors Affecting Demand

Several factors can influence demand besides price.

These include:

Income

Higher income often increases demand for many goods.

Tastes and Preferences

Changes in consumer preferences can increase or decrease demand.

Price of Related Goods

Goods may be substitutes or complements.

Examples:

• Tea and coffee (substitutes)

• Cars and petrol (complements)

Population

A larger population usually leads to higher demand.

Expectations

Expectations about future prices can influence demand today.

Movement vs Shift in Demand

Students must understand the difference between these two concepts.

Movement Along the Demand Curve

Occurs when the price of the good changes.

Shift of the Demand Curve

Occurs when other factors change, such as income or preferences.

Exam Tips for Students

Students preparing for O Level Economics (2281) and IGCSE Economics (0455) should be able to:

✔ Define demand clearly
✔ Draw and explain a demand curve
✔ Explain the law of demand
✔ Identify factors that shift demand

Demand diagrams frequently appear in both MCQ and structured exam questions.

Learn Economics with IVY Online

At IVY Online, students studying Cambridge Economics can access:

• Concept-based lectures

• Diagram explanations

• Past paper practice

• Exam-focused revision strategies

This helps students build strong understanding of economic concepts and perform well in exams.