2.1
Demand
Define demand and the law of demand, build market demand from individual demand, explain what shifts the demand curve, and separate a shift from a movement along it. HL adds the assumptions behind the downward slope.
Level and scope checked against the Economics guide (course first assessed 2022; October 2022 update), pp. 20–21, 25–26, on 11 Nov 2026. AI-assisted check, not reviewed by a teacher.
Contents
- 1Learning objectives and review status
- 2HL learning objectivesHL
- 3Demand, price and the demand curve
- 4Individual and market demand
- 5Non-price determinants of demand
- 6Movements along the demand curve and shifts of the curve
- 7HL: assumptions behind the law of demandHL
- 8Revision summary and common mistakes
- 9Practice and feedback: 10 marks
- 10Practice and feedback: 10 marksHL
- 11Practice and feedback: 4 marks
- 12Practice and feedback: 4 marks
- 13Practice and feedback: 2 marks
- 14Sources and review status
1Learning objectives and review status
- Define demand, effective demand and quantity demanded, and state the law of demand.
- Read a demand schedule and draw a correctly labelled demand curve from it.
- Derive market demand from the demands of individual consumers.
- Explain the direction in which income, tastes, expected prices, related-good prices and the number of buyers each move demand.
- Distinguish, in words and on a diagram, between moving along a demand curve and shifting it.
2HL learning objectivesHL only
- account for the downward slope with the income and substitution effects and with diminishing marginal utility.
3Demand, price and the demand curve
is the quantity of a good or service that consumers are willing and able to buy at each price during a stated period, (with other influences held constant). Demand describes a whole range of price and quantity combinations, not one amount.
Willingness alone is not enough. is willingness to buy backed by the ability to pay: a wish for a good without the purchasing power to buy it is not demand. is the amount consumers plan to buy at one particular price. It is a single point on the demand relationship, whereas demand is the whole relationship.
The states that, ceteris paribus, quantity demanded falls as price rises and rises as price falls. Price and quantity demanded move in opposite directions: the relationship is inverse (negative). Each consumer has a limited income and compares the price of a good with the benefit expected from it. At a higher price fewer consumers judge the good to be worth its price, and those who still buy tend to buy less.
The law is a tendency, not an arithmetic rule. It says how quantity demanded responds to price when income, tastes, the prices of related goods, expectations and the number of consumers are all unchanged. If one of these changes at the same time as the price, the quantity bought can move in either direction, which is why the law is always stated ceteris paribus.
A demand schedule is a table of the quantity demanded at each of a range of prices. A plots the same information, with price on the vertical axis and quantity on the horizontal axis. Because of the law of demand the curve slopes downward from left to right. It can be drawn as a straight line for clarity even when actual demand is not linear.
| Price per ticket ($) | Quantity demanded (tickets per week) |
|---|---|
| 12 | 200 |
| 10 | 300 |
| 8 | 400 |
| 6 | 500 |
| 4 | 600 |
All figures are invented.
Reading down the table, each fall of $2 in the price is matched by a rise of 100 tickets in the quantity demanded. Plotting the five pairs and joining them gives a downward-sloping demand curve. Moving from one row to another is a movement along that curve: the price has changed, but demand, the whole schedule, has not.
The bag charge also shows why the law is stated ceteris paribus. If attitudes to plastic waste changed over the same years, part of the fall in bags issued would be a leftward shift of the demand curve, not a movement along it. A single before-and-after comparison cannot separate the two.
Check your understanding
Key terms
- Demand
- The quantity of a good or service that consumers are willing and able to buy at each price during a stated period, other influences remaining unchanged.
- Effective demand
- Demand backed by both willingness and ability to pay, rather than a wish for a good without the resources to buy it.
- Quantity demanded
- The amount consumers are willing and able to buy at one particular price.
- Law of demand
- The tendency for quantity demanded to fall as price rises, and rise as price falls, ceteris paribus.
- Demand curve
- A curve showing quantity demanded at alternative prices, normally downward sloping in the standard market model.
- Ceteris paribus
- Holding other relevant influences constant so that the effect of a change in one variable can be isolated, at least within the model.
4Individual and market demand
is the total quantity demanded by all the consumers in a market at each price. It is found by adding the quantities that the individual consumers demand at each price. The sum is horizontal: at a given price on the vertical axis, the individual quantities are added along the horizontal axis. Prices are never added, because the market curve shows a total quantity, not a total of prices.
| Price per loaf ($) | Consumer A | Consumer B | Consumer C | Market demand (A + B + C) |
|---|---|---|---|---|
| 4 | 1 | 0 | 2 | 3 |
| 3 | 2 | 1 | 3 | 6 |
| 2 | 3 | 2 | 5 | 10 |
| 1 | 4 | 4 | 7 | 15 |
All figures are invented. Quantities are loaves per week.
At $3 the market quantity demanded is 2 + 1 + 3 = 6 loaves; at $2 it is 3 + 2 + 5 = 10 loaves. Consumer B buys nothing at $4, so at that price the market consists of A and C only. Each individual demand curve slopes downward, so their sum does too. The market demand curve lies to the right of every individual curve, and it is flatter than any of them, because a given fall in price adds the extra purchases of every consumer.
Because market demand is a sum over consumers, it changes when the number of consumers changes, even if no individual's demand does. If a fourth consumer joins this market, a quantity is added at every price and the market demand curve shifts to the right. This is why the number of consumers is one of the non-price determinants of demand.
Check your understanding
Key terms
- Market demand
- The horizontal sum of individual quantities demanded at each price.
- Demand
- The quantity of a good or service that consumers are willing and able to buy at each price during a stated period, other influences remaining unchanged.
5Non-price determinants of demand
A non-price determinant of demand is any influence on demand other than the good's own price. When one of them changes, more or less is demanded at every price, so the whole demand curve shifts: to the right for an increase in demand and to the left for a decrease. There are five to know.
- Income. For a , a rise in consumers' income raises demand: households can afford more at every price, so the curve shifts right, and a fall in income shifts it left. For an the link is reversed: as income rises, consumers switch to alternatives they prefer (from bus travel to a car, from a supermarket's own-brand food to branded food), so demand falls and the curve shifts left. Most goods are normal.
- Tastes and preferences. When a good becomes more fashionable or better regarded, through advertising, new information or changing habits, consumers want more of it at every price and demand shifts right. A health warning or a fall from fashion shifts demand left.
- Future price expectations. If consumers expect the price to rise soon, they buy now to avoid paying more later, so demand today increases and the curve shifts right. If they expect the price to fall, they postpone purchases and demand today decreases.
- Prices of related goods: substitutes. satisfy the same want (tea and coffee; bus and rail travel on one route). If the price of a substitute rises, some of its buyers switch to this good, so demand for this good rises and its curve shifts right. If the substitute becomes cheaper, demand for this good falls.
- Prices of related goods: complements. are used together (printers and ink; cars and petrol). If the price of a complement rises, less of the pair is bought, so demand for this good falls and its curve shifts left. A cheaper complement raises demand for this good.
- Number of consumers. More buyers in the market, through population growth, a change in the age structure or access to a new market, add quantities at every price, so market demand shifts right. Fewer buyers shift it left.
Naming the determinant is not enough: state which way demand moves and why. For related goods, first identify the relationship. A fall in rail fares reduces the demand for bus travel on the same route, because the two are substitutes, but it could raise demand at station cafés, because a coffee bought there is a complement to the rail journey.
| Change | Effect on demand | Demand curve shifts |
|---|---|---|
| Income rises (normal good) | Increases | Right |
| Income rises (inferior good) | Decreases | Left |
| The good becomes more fashionable | Increases | Right |
| Consumers expect the price to rise | Increases now | Right |
| Price of a substitute rises | Increases | Right |
| Price of a complement rises | Decreases | Left |
| Number of consumers rises | Increases | Right |
Each line is reversed for the opposite change. In every case the good's own price has not changed.
Check your understanding
Key terms
- Normal good
- A good for which an increase in real income tends to increase demand, with preferences and other influences held constant.
- Inferior good
- A good for which an increase in real income tends to reduce demand as consumers switch toward preferred alternatives.
- Substitute goods
- Goods that can satisfy a similar want, so a rise in the price of one may increase demand for the other.
- Complementary goods
- Goods commonly consumed together, so a change that makes one more expensive or less attractive can reduce demand for the other.
6Movements along the demand curve and shifts of the curve
A movement along the demand curve has only one cause: a change in the good's own price. A fall in price causes an extension of quantity demanded (a movement down the curve); a rise in price causes a contraction (a movement up the curve). Demand, the whole curve, is unchanged.
A shift of the demand curve is caused only by a change in a non-price determinant. A rightward shift is an increase in demand: more is demanded at every price. A leftward shift is a decrease in demand. Saying “demand increases because price falls” confuses the curve with a point on it.
A worked scenario with invented figures: a café sells 240 lunches a day at $12. A large office opens nearby, increasing the number of potential consumers, and at $12 the café can now sell 300 lunches. The demand curve has shifted right, because a non-price determinant changed: 60 more lunches are demanded at the same price. If the café then raises its price to $13 and sales fall to 280, that is a contraction along the new demand curve, not a leftward shift. Demand is still higher than it was before the office opened.
Check your understanding
7HL: assumptions behind the law of demandHL only
The law of demand rests on assumptions about how consumers respond to a change in price. Two explanations of the downward slope are required: the income and substitution effects of a price change, and the law of diminishing marginal utility.
The : when the price of a good falls while other prices stay the same, the good becomes cheaper relative to its substitutes. Consumers replace some of the now relatively dearer alternatives with it, so quantity demanded rises. The substitution effect always moves quantity demanded in the opposite direction to the price.
The : a lower price also raises consumers' real income, which is the purchasing power of a given money income, because the same purchases now cost less. For a , higher real income leads consumers to buy more, so quantity demanded rises again. For a normal good the two effects reinforce each other: a fall in price raises quantity demanded on both counts, and a rise in price lowers it on both counts. This is why the demand curve slopes downward.
is the satisfaction gained from consumption, and marginal utility is the extra satisfaction from consuming one more unit. The states that as a person consumes more units of a good in a given period, the marginal utility of each further unit eventually falls. The first units usually add more satisfaction than later ones. A consumer buys another unit only if it is worth at least its price, so a unit that adds less satisfaction is bought only at a lower price. Lower prices are therefore needed to induce larger purchases.
| Cup | Marginal utility (the most the consumer would pay, $) | Bought if the price is |
|---|---|---|
| 1st | 5.00 | $5.00 or less |
| 2nd | 3.50 | $3.50 or less |
| 3rd | 2.00 | $2.00 or less |
| 4th | 0.50 | $0.50 or less |
All figures are invented. Marginal utility is expressed as the most the consumer would pay for that cup.
At a price of $4 this consumer buys one cup, because only the first is worth at least $4. At $3 the second cup is also worth its price, so two are bought; at $2, three. Each fall in price brings a further unit within reach because that unit's marginal utility is lower than that of the one before. Quantity demanded rises as price falls, which is the law of demand.
Check your understanding
- Substitution effect: a lower price makes the good relatively cheaper, so consumers switch towards it.
- Income effect: a lower price raises real income; for a normal good this raises quantity demanded.
- Diminishing marginal utility: each further unit adds less satisfaction, so it is bought only at a lower price.
Key terms
- Income effectHL
- The change in quantity demanded caused by a price change altering consumers' real purchasing power, with other influences held constant.
- Substitution effectHL
- The change in quantity demanded caused by a price change altering the relative attractiveness of a good compared with substitutes.
- Law of diminishing marginal utilityHL
- As consumption of a good increases, the additional utility from each further unit tends to fall, other things equal.
- UtilityHL
- The satisfaction or benefit a consumer obtains from consuming a good or service.
- Normal good
- A good for which an increase in real income tends to increase demand, with preferences and other influences held constant.
8Revision summary and common mistakes
- Demand is the whole relationship between price and quantity; quantity demanded is one point on it.
- Demand must be effective: willingness to buy backed by ability to pay.
- Law of demand: price and quantity demanded move in opposite directions, ceteris paribus.
- Market demand adds the individual quantities horizontally at each price.
- A change in the good's own price moves consumers along the demand curve (extension or contraction). A change in a non-price determinant shifts the demand curve.
- Higher income raises the demand for a normal good and reduces the demand for an inferior good.
- If the price of a substitute rises, demand for this good rises (the curve shifts right). If the price of a complement rises, demand for this good falls (the curve shifts left).
- An expected rise in price raises demand now; more consumers raise market demand.
9Practice and feedback: 10 marks
10Practice and feedback: 10 marksHL only
11Practice and feedback: 4 marks
12Practice and feedback: 4 marks
13Practice and feedback: 2 marks
14Sources and review status
Written with AI assistance. The sources below were consulted on ; each entry says what it was used for and what it does not cover. Not reviewed by a teacher. Not approved as a finished revision resource.
Not yet checked against any source: Individual and market demand (section market-demand): adding individual demands horizontally to obtain market demand is not on the textbook pages opened; an unopened revision site is the only cross-check; the HL note on inferior goods and the Giffen case (beyond the syllabus); the invented schedules and the café scenario.
Sources consulted
Diploma Programme Economics guide (course first assessed 2022; October 2022 update; cover reads "First assessment 2024")
International Baccalaureate. IB curriculum document, learner's own copy, 10 Nov 2026. Printed pp. 20-21 (syllabus outline) and the topic tables on the printed pages recorded on each syllabus node; assessment outline pp. 60-65; command terms pp. 74-75. PDF page = printed page + 6.
Used for: Topic titles, the scope of each topic and SL/HL level, the assessment format and the command terms, as recorded on each syllabus node.
Limits: Read from the learner's own PDF, which is not redistributed. The IB's online copy could not be opened by automated access (HTTP 403 on 11 November 2026), so this copy was not compared with it. It sets what must be taught; it does not explain the economics. AI-assisted reading, not checked by a teacher.
OpenStax, Rice University. Reference, read in full, 11 Nov 2026. 3.1, especially demand, quantity demanded, supply, quantity supplied and market equilibrium
Used for: Demand versus quantity demanded and the law of demand; supply versus quantity supplied and the law of supply; equilibrium; surplus (excess supply) and shortage (excess demand) and how price moves toward equilibrium.
Limits: Does not cover non-price determinants (those are in section 3.2), market demand or supply as a sum of individual curves, consumer or producer surplus, the functions of price, price controls, taxes, subsidies or externalities. University-level US textbook; not an authority for IB scope or level.
Carrier bags: why there's a charge
UK Department for Environment, Food and Rural Affairs. Real-world source, read in full, 11 Nov 2026. Policy paper, sections on results and the 2021 extension
Used for: Start date in England, bag numbers at main supermarkets in 2014 and 2019-20, the 95% fall and the rise to a 10p minimum for all retailers on 21 May 2021.
Limits: Counts single-use bags at the main supermarkets only; sales of thicker 'bags for life' are not netted off.
Save My Exams. Revision site (study aid, not an authority), not opened directly, 11 Nov 2026. Demand; law of demand; individual and market demand; HL effects and diminishing marginal utility
Used for: Reported cross-check of effective demand, the demand curve, market demand aggregation and the HL assumptions behind the law of demand.
Limits: Third-party revision site. The page body could not be retrieved by automated access on 11 November 2026 (only site navigation and a login prompt were returned), so what it says is not confirmed. A study aid, not an authority for IB scope or for the economics.
Principles of Microeconomics 3e: 3.2 Shifts in Demand and Supply for Goods and Services
OpenStax, Rice University. Reference, read in full, 11 Nov 2026. Section 3.2
Used for: Non-price determinants of demand (income for normal and inferior goods, tastes, population, prices of related goods, expectations) and of supply (input costs, natural conditions, technology, taxes, regulation and subsidies); the ceteris paribus assumption; a shift versus a movement along a curve. States that taxes shift supply left and subsidies shift it right.
Limits: No tax or subsidy diagram with incidence or welfare areas; no number-of-firms, joint or competitive supply. University-level US textbook: its wording, examples and diagrams are not IB wording and it is not an authority for IB scope or SL/HL level.
Principles of Microeconomics 3e: 6.1 Consumption Choices
OpenStax, Rice University. Reference, read in full, 11 Nov 2026. Section 6.1
Used for: Total and marginal utility; the law of diminishing marginal utility; the utility-maximising rule (equal marginal utility per dollar).
Limits: Budget-line framing that goes beyond the IB treatment. University-level US textbook: its wording, examples and diagrams are not IB wording and it is not an authority for IB scope or SL/HL level.
Principles of Microeconomics 3e: 6.2 How Changes in Income and Prices Affect Consumption Choices
OpenStax, Rice University. Reference, read in full, 11 Nov 2026. Section 6.2
Used for: Definitions of the substitution effect and the income effect of a price change.
Limits: The page derives the demand curve from utility maximisation under a budget constraint; it does not itself present the two effects as the explanation of the law of demand. University-level US textbook: its wording, examples and diagrams are not IB wording and it is not an authority for IB scope or SL/HL level.