Our Economy: Strand 3 This might be caused by the following:


• Income: Consumers income may have decreased which means they can now buy less. Example: Deirdre’s customers’ income dropped by 10% and so they demand less of her doughnuts.


• Price of a substitute good: The price of product X may have decreased and so more of product Y is in demand. Example: Tasty Doughnuts dropped their price by 10%. A percentage of Deirdre’s customers will buy the Tasty Doughnuts and therefore demand for Deirdre’s Doughnuts will decrease.


• Complementary good: An increase in the price of a good, e.g. shoes cause a decrease in the quantity demanded of shoelaces. Example: The price of hot chocolate has increased and so the demand for Deirdre’s Doughnuts falls.


• Taste: As consumers’ preferences change, they will demand less, e.g. fashion trends. Example: As consumers become more health conscious, they are now demanding less of Deirdre’s Doughnuts.


• Expectations: If consumers expect the product or service to be less expensive in the future, they will buy less now, e.g. knowing that a sale is starting soon and a TV will be cheaper. Example: Deirdre plans to do special offers for the summer (buy four get the fifth free). Consumers will delay buying their doughnuts until the offer is valid.


• Unplanned factors: Bad weather will see a decrease in demand for outdoor events such as food or music festivals. Example: A leading scientist issues research on the negative impact of doughnuts on health. Demand for Deirdre’s Doughnuts will decrease.


Write It!


The scenarios below show how demand increases or decreases. Place a tick () in the correct box for each scenario.


Scenario An increase in VAT on the price of hotel rooms.


The minimum wage for meat factory workers increase.


The demand for face masks increases due to an unforeseen event (Covid-19).


An increase in the price of a substitute good. A decrease in the price of a substitute good.


An increase in the price of a complementary good.


A decrease in the price of a complementary good.


A business invests more in advertising and branding.


Increased demand


Decrease demand





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