Demand: the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
Willing: they want it. Able: they can afford it. Wanting something you can’t afford isn’t demand.
Demand always has a price and a time: ‘Amir buys 6 cups of coffee a week at £2.00 a cup.’
Quantity demanded is the amount bought at one particular price. Demand is the whole relationship between price and quantity (the whole curve).
Individual demand is one consumer’s demand; adding up every consumer gives the market demand.
Exam tipOnly about half of students got full marks for defining demand. For 2 marks you need willing and able to buy plus a price and a time period. ‘The want or desire for a product’ gets just 1 mark.
Demand
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
Quantity demanded
The amount consumers will buy at one particular price.
3.1.3.1 The demand curve
The law of demand and the demand curve
The law of demand: as the price of a product falls, the quantity demanded rises, and as price rises, quantity demanded falls. Price and quantity demanded have an inverse relationship.
Why? At a lower price, people can afford more units, more people can afford it at all, and it looks better value than other things they could buy.
A demand schedule is a table of prices and the quantity demanded at each one.
Plotting an individual demand curve: price on the vertical axis, quantity demanded on the horizontal axis; plot each pair, join the points, and label the line D.
The demand curve slopes down from left to right.
Price of a cup of coffee
£3.00
£2.50
£2.00
£1.50
£1.00
Amir’s quantity demanded (cups a week)
2
4
6
8
10
Amir’s individual demand curve, plotted from the schedule (invented data)
Worked exampleUsing Amir’s schedule, calculate the percentage change in the quantity of coffee Amir demands when the price falls from £2.50 to £2.00.
Change in quantity = 6 − 4 = 2 cupsnew − original
2 ÷ 4 × 100 = 50%divide by the original quantity
A 50% rise in quantity demanded
Exam tipWhen you plot a curve, label both axes (Price, Quantity) and label the curve (D). In one year 14% of students lost marks just for not labelling their curves.
Law of demand
As price falls, quantity demanded rises; as price rises, quantity demanded falls.
Demand schedule
A table showing the quantity demanded at each price.
Demand curve
A graph of the quantity demanded at each price; it slopes down from left to right.
3.1.3.1 Movements along the demand curve
Movements along the demand curve
A change in the product’s own price causes a movement along the demand curve. The curve itself doesn’t move.
Extension of demand: price falls, so quantity demanded rises (A to B on the diagram).
Contraction of demand: price rises, so quantity demanded falls (A to C).
Say ‘quantity demanded’ for a movement. ‘The price rose, so demand fell’ is wrong; ‘the price rose, so quantity demanded fell’ is right.
Own price changes: a movement along the same demand curve
Watch outA change in the product’s own price never shifts its own demand curve. One mark scheme says outright that a change in the price of foreign holidays is not a factor that shifts the demand for foreign holidays.
Extension of demand
A rise in quantity demanded caused by a fall in the product’s own price: a movement down the curve.
Contraction of demand
A fall in quantity demanded caused by a rise in the product’s own price: a movement up the curve.
3.1.3.1 The factors which influence demand
Factors that shift the demand curve
Any change other than the product’s own price shifts the whole curve. Increase in demand = shift right (more bought at every price). Decrease in demand = shift left.
Substitutes and complements, and how a change in one market spreads to another, are covered in full in Equilibrium Price and Related Markets.
Factor
Change
Effect on demand
Income, normal goods
Incomes rise
Increase (right): people can afford more
Income, inferior goods
Incomes rise
Decrease (left): people switch to better-quality options, e.g. from value-range to branded food
Advertising and marketing
A successful campaign
Increase (right)
Tastes and preferences
A product becomes fashionable or is linked to health
Increase (right); falls out of fashion: decrease
Population size and structure
More people, or more of a certain age group
Increase in demand for what that group buys, e.g. more older people raise demand for healthcare
Price of a substitute
The substitute gets dearer (tea gets dearer)
Increase for this product (coffee)
Price of a complement
The complement gets dearer (printers get dearer)
Decrease for this product (ink cartridges)
Expectations of future prices
People expect the price to rise soon
Increase now: they buy before it goes up
Weather and seasons
A heatwave
Increase in demand for ice cream and fans
An increase in demand shifts the curve right; a decrease shifts it left
Exam tipGive the factor, then the direction, then why: ‘Higher incomes mean people can afford more foreign holidays, so demand increases and the curve shifts right.’
Increase in demand
More is demanded at every price: the demand curve shifts right.
Decrease in demand
Less is demanded at every price: the demand curve shifts left.
Normal good
A good whose demand rises when incomes rise.
Inferior good
A good whose demand falls when incomes rise, e.g. some value-range products.
3.1.3.2 What is meant by supply
What supply means
Supply: the quantity of a good or service that producers are willing and able to produce and sell at a given price in a given time period.
Example: ‘Hilltop Honey supplies 200 jars a week at £6 a jar.’
Quantity supplied is the amount offered for sale at one price. Supply is the whole relationship (the whole curve).
An individual firm’s supply is one producer’s; adding up every firm gives the market supply.
Exam tipSupply is about producers (sellers), demand is about consumers (buyers). Keep the two apart: muddling demand and supply factors is the most common error on Paper 1, every year.
Supply
The quantity of a product that firms are willing and able to produce and sell at a given price in a given time period.
Quantity supplied
The amount firms will offer for sale at one particular price.
3.1.3.2 The supply curve
The law of supply and the supply curve
The law of supply: as the price of a product rises, the quantity supplied rises. Price and quantity supplied have a positive relationship.
Why? A higher price means more revenue for each unit, so producing more becomes more profitable. Higher prices give producers an incentive to expand production: they use spare machines, run extra shifts, or switch from making other products.
Plotting a firm’s supply curve from production data: price on the vertical axis, quantity supplied on the horizontal axis; plot the points, join them and label the line S.
The supply curve slopes up from left to right.
Price of a jar of honey
£4
£5
£6
£7
£8
Hilltop Honey’s quantity supplied (jars a week)
100
150
200
250
300
Hilltop Honey’s supply curve, plotted from its production data (invented data)
Worked exampleUsing Hilltop Honey’s data, calculate the percentage increase in quantity supplied when the price rises from £5 to £7.
Change = 250 − 150 = 100 jarsnew − original
100 ÷ 150 × 100 = 66.7%divide by the original quantity; round to 1 d.p.
66.7%
Exam tipExplain the law of supply through profit: higher price → more revenue per unit → more profit → incentive to produce more.
Law of supply
As price rises, quantity supplied rises; as price falls, quantity supplied falls.
Supply curve
A graph of the quantity supplied at each price; it slopes up from left to right.
3.1.3.2 Movements along the supply curve
Movements along the supply curve
A change in the product’s own price causes a movement along the supply curve.
Extension of supply: price rises, so quantity supplied rises (A to B).
Contraction of supply: price falls, so quantity supplied falls (A to C).
If demand for a product falls, its price falls, so producers cut the quantity supplied: a movement along the supply curve, not a shift of it.
Own price changes: a movement along the same supply curve
Watch outA fall in demand does not shift the supply curve. It lowers the price, and producers respond by supplying a smaller quantity: a contraction along the same curve.
Extension of supply
A rise in quantity supplied caused by a rise in the product’s own price.
Contraction of supply
A fall in quantity supplied caused by a fall in the product’s own price.
3.1.3.2 The factors which influence supply
Factors that shift the supply curve
Anything other than the product’s own price that changes how much firms are willing and able to sell shifts the supply curve. Increase in supply = shift right. Decrease in supply = shift left.
A dated example: in 2026, conflict in the Middle East disrupted energy supplies and pushed up energy prices (Bank of England, November 2026). For firms that use a lot of energy, such as bakeries, greenhouses and glassworks, higher costs shift supply to the left.
Factor
Change
Effect on supply
Costs of production (wages, raw materials, energy, rent)
Costs rise
Decrease (left): each unit is less profitable
Technology
Better machines or methods
Increase (right): more output from the same resources, so lower costs
Indirect taxes (e.g. VAT, duties)
A new or higher tax
Decrease (left): a tax adds to firms’ costs
Subsidies
The government pays producers
Increase (right): a subsidy lowers firms’ costs
Weather and natural conditions
Drought, floods, frost
Decrease (left), especially for crops; good weather: increase
Number of firms
New firms enter the market
Increase (right); firms leave: decrease
An increase in supply shifts the curve right; a decrease shifts it left
Exam tip‘Increase’ always means right, for supply as well as demand. Don’t think of ‘up’: a supply curve that moves up the page has shifted left, which is a decrease.
Increase in supply
More is supplied at every price: the supply curve shifts right.
Decrease in supply
Less is supplied at every price: the supply curve shifts left.
Subsidy
A payment from the government to producers that lowers their costs and increases supply.
Indirect tax
A tax on spending, such as VAT, that adds to firms’ costs and decreases supply.
3.1.3.1–3.1.3.2 Shifts of, and movements along, the curves
Shift or movement? A decision routine
Ask three questions every time.
1. Is it a change in the product’s own price? Yes → a movement along the curve (extension or contraction). Stop here.
2. If not, does it change what buyers want or can afford, or what sellers can produce? Buyers → the demand curve shifts. Sellers’ costs, technology, numbers or conditions → the supply curve shifts.
3. Which way? More at every price → right (increase). Less → left (decrease).
Change
Which curve?
Shift or movement?
Direction
The price of trainers rises
Demand for trainers
Movement
Contraction of demand
Incomes rise (trainers are a normal good)
Demand
Shift
Right (increase)
A trainer brand signs a famous footballer
Demand
Shift
Right (increase)
Wages in trainer factories rise
Supply
Shift
Left (decrease)
New machines cut the time to make a trainer
Supply
Shift
Right (increase)
The price of trainers rises (seen by makers)
Supply
Movement
Extension of supply
Worked exampleA new tax is put on sugary drinks. What happens to the supply curve for sugary drinks?
Own price? No: it is a tax.so it is a shift, not a movement
Buyers or sellers? A tax adds to sellers’ costs.so the supply curve moves
Less supplied at every price.so the shift is to the left
Supply decreases: the supply curve shifts left (S to S1).
Watch outExaminers say every year that students ‘muddled demand and supply factors or the direction of a shift’. Run the three questions before you draw anything.
Shift
The whole curve moves because something other than the product’s own price has changed.
Movement along a curve
A change in quantity demanded or supplied caused by a change in the product’s own price.
Genious