Define: Competitive demand
When goods are substitutes, so buying one means you don’t buy the other.
Define: Composite supply
When a good or service can be obtained from different sources.
Define: Demand
The quantity of a good/service that consumers are able and willing to buy at a given price during a given period of time.
Define: Individual demand
Demand of an individual or firm, measured by the quantity bought at a certain price at one point in time.
Define: Joint demand
When goods are brought together.
State the ‘Law of Demand’.
As the price of a good falls, the quantity demanded rises, ceteris paribus (and vice versa).
Define: Market demand
Sum of all individual demands in a market.
What is a movement along the demand curve caused by?
A change in the price of the good itself.
What causes a contraction on the demand curve?
Increase in price
What causes a extension on the demand curve?
Decrease in price
What causes a shift in the demand curve?
A change in non-price factors (PASIFIC).
What does PASIFIC stand for?
Population
Advertising
Substitutes
Income
Fashion/tastes
Interest rates
Complements
What does PASIFIC represent?
The determinants of demand.
Define: Composite demand
When a good has multiple uses.
What is derived demand?
Demand for a good or factor that depends on the demand for another product.
Explain the law of demand using diminishing marginal utility.
As consumers buy more units of a good, the extra satisfaction (utility) gained from each additional unit falls, so they’ll only buy more if the price decreases.
Distinguish between movements and shifts in demand.
Movement: Caused by a change in the good’s own price.
Shift: Caused by a change in any non-price factor (PASIFIC).
How does advertising affect demand?
Effective advertising increases consumer awareness and preferences, shifting demand rightwards.
How do substitutes and complements affect demand?
If the price of a substitute rises, demand for the good increases.
If the price of a complement rises, demand for the good falls.
How does income influence demand?
For normal goods, demand rises as income rises.
For inferior goods, demand falls as income rises.
Explain derived demand with an example.
If demand for houses rises, the demand for construction workers and bricks also rises — they’re derived from demand for housing.
Evaluate whether an increase in advertising will always increase demand.
✅ May shift demand right if consumers respond positively.
❌ May have limited impact if the market is saturated or consumers are loyal to competitors.
Define: Normal good
Goods for which demand increases when income rises, and falls when income decreases, ceteris paribus.
Define: Inferior good
Goods for which demand falls when income rises, and rises when income falls, ceteris paribus.
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1.1 The Economic Problem39
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1.2 The Allocation of Resources27
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1.3 Opportunity Cost19
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2.1 Specialisation and Trade16
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2.2 Demand26
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2.3 Supply16
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2.4 Consumer and Producer Surplus10
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2.5 The Interaction of Markets13
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2.6 Elasticity28
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2.7 The concept of margin10
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3.1 Business objectives34
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3.2 Costs and economies of scale32
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3.3 Revenue and profit17
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2.8 Market failure and externalities12
