This section of the Cambridge IGCSE Economics (0455) syllabus requires students to be able to define demand.

Demand (sometimes referred to as effective demand) can be defined as the ability and willingness of consumers to purchase a good or service at certain prices. This means that an individual is unable to buy a product unless they have the necessary funds as well as desire to make their demand effective.

In general, the higher the price of any good or service, the lower its demand because people are less able and willing to pay. Hence, there is an inverse relationship between the price of a good or service and the price. This rule is known as the law of demand.

The law of demand states there is an increase in quantity demanded if the price falls

For example, people are more likely to buy confectionery products at a store if the price is relatively low. The same applies to most goods and services. Although there are other factors that can affect the demand for a product (such as quality), the price if the main factor for most people. This is why customers are attracted by special deals (bargains or discounted prices) on products sold at supermarkets.

Price cuts are used to raise the quantity demanded

Note that price is only one factor that affects the demand for a good or service. There are many other factors (covered here under "Conditions of demand"), such as:

• The income of individuals and households (some economists argue that income is the key determinant of demand).

• The price of alternative products (substitutes), e.g., tea and coffee.

• The price of complementary products, e.g., tortilla chips and salsa dip, game consoles and games, or smartphones and protective cases.

• Habits and tastes of individuals and households.

• The level of utility (or satisfaction) derived from consuming a certain good or service.

• The effectiveness of marketing strategies, such as persuasive and/or informative advertising.

• Government policies, such as the imposition of taxes on tobacco and alcohol products or subsidies provided on education and healthcare services.

• The state of the economy, such as whether the economy is in a boom or recession.

• Other factors (depending on the product in question), such as the weather and demographics (e.g., age, gender, ethnicity, or religious beliefs).

 Discussion activity

In small groups of two or three people, come up with a list of 10 or more different substitute products and another list with just as many complementary products.

 Teacher only box

Examples of substitute products might include:

1. Android phones versus Apple iPhones

2. Boeing versus Airbus

3. Butter versus margarine

4. Coca-Cola versus Pepsi Cola

5. Duracell versus Energizer (or single-use and rechargeable batteries)

6. Eyeglasses versus contact lenses

7. Ferrari versus Lamborghini (or any other supercar manufacturer)

8. Hertz versus Avis (or any other car rental company)

9. iPhones versus Samsung smartphones (or any other manufacturer such as Xiaomi and HTC)

10. Laptop computers versus tablet computers versus desktop computers

11. McDonald's versus Burger King (or any other fast food chain such as KFC and Subway)

12. Milkshakes versus smoothies

13. Netflix versus Disney+ (or any other online streaming service)

14. Nike versus Adidas sports shoes

15. Physical textbooks versus digital textbooks

16. Procter & Gamble versus Unilever (mass producers of fast-moving consumer goods)

17. Starbuck Coffee versus Tim Hortons (or any other coffee chain, such as Costa Coffee and McCafé)

18. Tea versus coffee (or any other hot beverage, like hot chocolate)

19. Tesla versus BYD (or any other manufacturer of electric vehicles)

20. UPS versus TNT versus FedEx (or any other courier company)

21. Visa cards versus debit cards

Examples of complementary products might include:

1. Bread and butter (or jam, peanut butter, Nutella, or any other spread)

2. Cereal and milk

3. Cheese and grapes

4. Computer monitor, keyboard, and mouse (and mouse mat)

5. Electric vehicles and EV charging outlets

6. Fish and chips

7. Hot dogs and hot dog buns

8. Laptops and laptop cases

9. Motorcycles and protective helmets

10. Movies and popcorn

11. Paint and paint brushes

12. Pancakes and maple syrup (or honey)

13. Printer and ink cartridges

14. Razors and razor blades

15. Shoes and socks

16. Smartphones and protective cases (or phone apps)

17. Snowboards and snowboard boots

18. Tennis balls and tennis rackets (tennis racquets)

19. Toothbrush and toothpaste

20. Tortilla chips and salsa dip

21. Video game consoles and video games