Lesson preview · Demand
Demand and what changes it
~8 min · Free to read
Imagine a band you like announces one concert in your city. How many tickets people would buy depends on the price:
| Price of a ticket | Tickets people would buy |
|---|---|
| 20 dollars | 800 |
| 40 dollars | 500 |
| 60 dollars | 200 |
The cheaper the ticket, the more tickets people buy.
Key Term
Demand
Demand is how much of a good people are willing and able to buy at each price. A fan with no money doesn’t count, however keen.
The table above is a demand schedule. Each row gives the quantity demanded at one price: 500 tickets at 40 dollars.
Key Term
The law of demand
When a good’s price rises, and nothing else changes, the quantity demanded falls: people buy less of it. Economists call that condition ceteris paribus, Latin for “other things being equal”. For most goods, there are two reasons:
- People switch to substitutes, goods that do the same job, such as a cheaper gig. This is the substitution effect.
- They can afford less, because their money now buys less. This is the income effect.
Now the band’s new song goes viral. More people want to go, whatever the price:
| Price of a ticket | Before the song | After the song |
|---|---|---|
| 20 dollars | 800 | 1,200 |
| 40 dollars | 500 | 900 |
| 60 dollars | 200 | 600 |
- If only the price changes, people move to another row of the same column: a change in quantity demanded.
- If something else changes for buyers, the whole column changes, here by 400 tickets at every price: a change in demand.
Key Term
What changes demand
Apart from the good’s own price, five things on the buyers’ side change demand:
- Income. People buy more of a normal good, such as holidays, when they earn more. They buy less of an inferior good when they earn more: a family may swap the bus for a car.
- Related goods. Coffee and tea are substitutes: they do the same job, so pricier coffee raises demand for tea. Consoles and games are complements: they’re used together, so cheaper consoles raise demand for games.
- Tastes. A viral song can make more people want tickets at every price.
- Expectations. If people expect the price to rise soon, they buy more now.
- Population. Both the number of people and their ages matter. In September 2026, a record 29.6% of people in Japan were 65 or older. Older people use more medical care, so as a country ages, its demand for health care rises.
Plot the schedule on a graph and you get a downward-sloping demand curve. When only the good’s own price changes, buyers move along the curve. When one of those five things changes, the whole curve shifts: right for more at every price, left for less.
So sliding along the curve is moving to another row of the same column in the table: quantity demanded changes. A shift is the whole column changing: demand changes.
Trap · Common Misconception
"A higher price lowers demand"
A higher price lowers the quantity demanded, not demand. Buyers slide along a curve that stays put.
Trap · Common Misconception
"The price rose and so did sales, so the law is broken"
Say the band charges 40 dollars before the song and sells 500 tickets. After the song, it charges 60 dollars and sells 600. The law isn’t broken: tastes changed too, so the whole column changed. Compare within one column: after the song, 60 dollars still sells fewer tickets than 40 dollars would (600 against 900).
Check yourself · no marks
Cinema tickets go up from 10 to 14 dollars. Mia starts watching films at home on a streaming service instead. Is this the substitution effect or the income effect?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Higher incomes make people want more of a normal good at every price, so its demand curve shifts right. For any change, ask: is it the good’s own price? If so, buyers move along the curve. If not, do buyers want more or less at every price? More shifts demand right; less shifts it left. If neither, demand stays put.
Practice · 1 / 5
Here is a café’s demand schedule for smoothies:
| Price of a smoothie | Smoothies bought each day |
|---|---|
| 3 dollars | 250 |
| 4 dollars | 200 |
| 5 dollars | 150 |
The café raises its price from 3 dollars to 5 dollars. Nothing else changes. What happens?
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