1.2 What determines the demand for a good or service in a market?

Monday, May 20, 2013

What students need to learn:

Students should be able to:
Additional Guidance Notes
Movement along the demand curve
Understand how a change in price causes a movement along a demand curve.
Students are not expected to have an understanding of utility theory or indifference curve analysis.
Shifts in the demand curve
Understand factors which may cause a shift in the demand curve, for example, changes in the price of substitutes or complementary goods; changes in real income and tastes.

Price, income and cross elasticities of demand
Explain price, income and cross elasticities of demand. Understand factors that influence elasticities of demand and their significance to firms and government.

Understand the relationship between price elasticity of demand and total revenue.
Students may have to calculate and interpret numerical values of price, income and cross elasticity of demand.

Students should understand the significance of elasticity to firms and government in terms of the imposition of indirect taxes and subsidies; changes
in real income and changes in the price of substitute and complementary goods.

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