Conditions of Demand (Cambridge (CIE) O Level Economics)

• Real Income determines how many goods/services can be enjoyed by consumers

• There is a direct relationship between income and demand for goods and services 

• Income increases

  • D Increases

    • Shifts right

    • (D→D₁)

• Income decreases

  • D Decreases

    • Shifts left

    • (D→D₂)

A Change in Tastes and Fashion

• If goods and 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 Increases

    • Shifts right

    • (D→D₁)

• Good becomes less fashionable

  • D Decreases

    • Shifts left

    • (D→D₂)

Improved Advertising and Branding

• If more money is spent on advertising or branding, then demand for goods and services will increase as more consumers become aware of the product

• There is a direct relationship between branding or advertising and demand

• Advertising increases

  • D Increases

    • Shifts Right

    • (D→D₁)

• Advertising decreases

  • D Decreases

    • 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 increases

    • Shifts Right

    • (D→D₁)

• Price of Good A decreases

  • D for Good B decreases

    • 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

• E.g. The price of printer ink increases so the demand for ink printers decreases

• Price of Good A increases

  • D for Good B decreases

    • Shifts left

    • (D→D₂)

• Price of Good A decreases

  • D for Good B increases

    • Shifts right

    • (D→D₁)

Changes in Population Size or 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 and services E.g. An ageing population will buy more hearing aids

• Population Increases

  • D Increases
    Shifts Right
    (D→D₁)

• Population Decreases

  • D Decreases
    Shifts Left
    (D→D₂)