ECO • SHS 1Term 1WAEC / WASSCE SyllabusFree Trial Topic
The Theory of Demand
The law of demand, demand schedules and curves, determinants of demand, shifts vs. movements along the curve, and exceptional demand.
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Real-World Context & Relevance in Ghana
A sharp rise in the price of imported rice in Ghanaian markets leads consumers to substitute with locally grown Volta rice or cassava/plantain.
Key Syllabus Learning Objectives
- 1State the law of demand and derive demand curves from schedules
- 2Distinguish between movements along a demand curve and shifts of the demand curve
- 3Analyze substitute, complementary, derived, and composite demand types
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Comprehensive Syllabus Study Notes
• The Law of Demand: States that, all other things being equal (ceteris paribus), as the price of a good rises, the quantity demanded falls; and as price falls, quantity demanded rises. Inverse relationship!
• Determinants of Demand (Non-price factors):
- Consumer disposable income (Normal goods: demand increases as income rises; Inferior goods: demand falls as income rises).
- Prices of related goods: Substitutes (e.g. Milo vs. Cowbell; tea vs. coffee) and Complements (e.g. cars and petrol; mobile phones and SIM cards).
- Tastes, preferences, and fashion.
- Size and age structure of the population.
- Expectation of future price changes.
• Movement Along vs. Shift of the Curve:
- Movement along the curve: Caused ONLY by a change in the price of the good itself (contraction or extension of demand).
- Shift of the curve: Caused by a change in any non-price factor (increase in demand shifts right; decrease shifts left).
• Exceptional / Abnormal Demand Curves: Giffen goods, Veblen/Ostentatious goods (snob appeal), and goods of speculative expectation.
- The Law of Demand: States that, all other things being equal (ceteris paribus), as the price of a good rises, the quantity demanded falls; and as price falls, quantity demanded rises. Inverse relationship!
- Determinants of Demand (Non-price factors):
- Consumer disposable income (Normal goods: demand increases as income rises; Inferior goods: demand falls as income rises).
- Prices of related goods: Substitutes (e.g. Milo vs. Cowbell; tea vs. coffee) and Complements (e.g. cars and petrol; mobile phones and SIM cards).
- Tastes, preferences, and fashion.
- Size and age structure of the population.
- Expectation of future price changes.
- Movement Along vs. Shift of the Curve:
- Movement along the curve: Caused ONLY by a change in the price of the good itself (contraction or extension of demand).
- Shift of the curve: Caused by a change in any non-price factor (increase in demand shifts right; decrease shifts left).
- Exceptional / Abnormal Demand Curves: Giffen goods, Veblen/Ostentatious goods (snob appeal), and goods of speculative expectation.
Practical Example:
A sharp rise in the price of imported rice in Ghanaian markets leads consumers to substitute with locally grown Volta rice or cassava/plantain.
Core Takeaway:
Never confuse "change in quantity demanded" (movement along one curve due to price) with "change in demand" (shift of the entire curve due to other factors).
WAEC / WASSCE Examiner Tips
- Never confuse "change in quantity demanded" (movement along one curve due to price) with "change in demand" (shift of the entire curve due to other factors).
Common Candidate Pitfalls & Errors to Avoid
- Moving along the demand curve and calling it a change in demand; a price change causes a change in quantity demanded only.
- Drawing a demand curve sloping upward because a favourite good seems more desirable at higher prices.
- Forgetting that a fall in the price of a complement increases demand for the good in question.
- Leaving negative quantities in a market demand schedule when a consumer would buy nothing at a high price.
- Treating expectations as permanent when they shift demand only temporarily.
Topic Mastery Checklist
- State the law of demand and derive demand curves from schedules
- Distinguish between movements along a demand curve and shifts of the demand curve
- Analyze substitute, complementary, derived, and composite demand types
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