Cambridge International as and a level Economics Ebook

eff ective demand
. Sellers are only willing to sell a product 
if the purchaser has the money to pay for the product. It is 
this eff ective demand that is of particular importance for 
economists.
■ 
Various prices: Prices are crucial to the functioning of a 
market. Although many things influence demand for a 
product, it is at the time of purchase, when we have to 
hand over our money and pay the price that we really judge 
whether the product is value for money – in other words, 
whether we really are willing and able to buy it. As the price 
goes up, and provided no other changes have occurred, 
more and more people will judge the product to be less 
worthwhile.
■ 
Per period of time: Demand must be time related. It is 
of no use to say that the local McDonald’s sold 20 Big Macs 
to consumers unless you specify the time period over 
which the sales occurred. If that was per minute then 
demand is high, but if that was per week then this would 
show there is little demand for Big Macs in this particular 
market.
■ 
Other things being equal: There are numerous potential 
influences on the demand for a product. Understanding the 
connections between the various influences is very diff icult 
if many of these elements are changing simultaneously. This 
is why it is necessary to apply the 
ceteris paribus
assumption 
referred to in 
Chapter 1
.
Notional demand: 
this demand is speculative and not 
always backed up by the ability to pay.
Eff ective demand: 
demand that is supported by the ability 
to pay.
KEY TERMS
The demand curve
Th
e defi nition of demand can be represented by what is 
called a 
demand curve
. Th
e example shown in 
Figure 2.1
is 
based on the overall 
market demand
for computers (PCs). 
Let us assume that we can identify a typical PC, i.e., one 
with a set of standard specifi cations We can also assume 
that we have collected statistical data about consumers’ 
preferences and that the quantity of PCs that people are 
willing and able to buy at various prices per period of time, 
other things being equal, can be represented by the data in 
Table 2.1.
Th
is data set is known as a 
demand schedule
. We 
can now plot the market demand curve on a graph to see 
how the quantity demanded of PCs relates to variations in 
price. Th
is market demand curve therefore represents the 
aggregation of many individual demand curves. 
Figure 2.1
shows the market demand curve for the data in
 Table 2.1.