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This lesson covers the theory of demand — one of the two fundamental building blocks of microeconomic analysis. You will learn about individual and market demand, the law of demand, movements along versus shifts of the demand curve, and the conditions (determinants) of demand. Understanding demand thoroughly is essential for AQA A-Level Economics Papers 1 and 3.
Key Definition: Demand is the quantity of a good or service that consumers are willing and able to purchase at a given price, in a given time period.
Note the two critical conditions: willingness and ability. A consumer may want a Ferrari, but if they cannot afford one, this does not constitute demand in the economic sense. Demand must be effective demand — backed by purchasing power.
Key Definition: The law of demand states that, ceteris paribus, as the price of a good rises, the quantity demanded falls, and vice versa. There is an inverse (negative) relationship between price and quantity demanded.
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