1.2.1 - Demand

Question 1

What is demand

Answer 1

• Demand is the amount of a good that consumers are willing and able to buy at a given price

Question 2

How does price of substitutes lead to a change in demand

Answer 2

• A substitute product is an alternative
• If the price of a substitute decreases, then the demand for the substitute product will increase, and vice versa

Question 3

How does price of compliments lead to a change in demand

Answer 3

• A complementary product is one that needs to be used with another product
• Another example is buying capsules for a coffee machine
• As the prices of these complimentary goods rise then demand for the main product falls

Question 4

How does price of alternative brands lead to a change in demand

Answer 4

• If an alternative brand is available and the product is not available then this will affect demand
• If consumers are able to buy a similar product, with a similar brand profile then demand may be affected

Question 5

How does change in consumer income lead to a change in demand

Answer 5

• As consumer incomes rise then demand for some products falls e.g. microwave meals – consumers may buy fresh food or eat out instead
• Equally as consumer incomes rise then they have more disposable income to spend on luxuries like; holidays, prestige cars etc.

Question 6

How does trends in fashion and tastes lead to a change in demand

Answer 6

• As trends in goods and services rise then demand for these products rise
• Trends tend to be a change in consumer preference over time e.g. Smartphones

Question 7

How does Marketing, Advertising and Branding lead to a change in demand

Answer 7

• Marketing can also stimulate demand e.g. promotions can help to encourage sales
• McDonald’s run the monopoly promotion every year
• The marketing mix can help a business to drive traffic to a website – through a sale or an offer
• Some websites like Groupon and Vouchercloud help to increase demand

Question 8

How does Population Structure / Demographic lead to a change in demand

Answer 8

• The UK population is getting older, this means that different products and services will be in higher demand
• Weddings are also going out of fashion which may mean that demand for wedding cakes will fall

Question 9

How does Time of Year lead to a change in demand

Answer 9

• Some products reach peak demand at certain times of the year in the UK:
• Christmas trees
• Easter eggs
• Pumpkins at Halloween

Question 10

How does Weather and Climate lead to a change in demand

Answer 10

• Some products have a seasonality factor and may be affected by the weather and the climate
• One example is an ice cream van’s Mr Whippy 99 ice creams

Question 11

How does External Shocks lead to a change in demand

Answer 11

• External shocks such as; terrorism, war, disease and health scares can change demand
• For example after terror attacks in Tunisia travel agents have found it hard to sell holidays there
• 30 British tourists were killed on the beach

Question 12

How does price lead to change in demand

Answer 12

• Price and demand are related – here is an example
• As the price increases on a product or service, normally, the demand will decrease as less customers are willing (or able) to pay the price