Economics, 3rd Edition

D = f(P

n

,

 

P

1 

P

2

 

...

 

P

n

−1

,

 

Y,

 

T,

 

P

LS

,

 

A,

 

E

 

)

Where:

 

●

P

n

 

= Price

 

●

P

1

 P

2

…

 

P

n

–1

 

= Prices of other goods – substitutes and complements

 

●

Y  

= Incomes – the level and distribution of income

 

●

T  

= Tastes and fashions

 

●

P

LS

 

= The level and structure of the population

 

●

A 

= Advertising

 

●

E 

= Expectations of consumers

If any of the variables affecting demand apart from price changes then the demand curve will shift, either 

to the right (an increase in demand) or to the left (a reduction in demand). For example, if the price of milk 

is 

€0.30 per litre a family might buy 5 litres of milk a week. If their income rises, they can now afford to 

buy more milk and so might now buy 7 litres a week. The price of milk has not changed – it is still 

€0.30 

per litre but the amount of milk the family buys has increased.

If any of the factors affecting demand other than price change then the amount consumers wish to pur-

chase changes whatever the price. The shift in the demand curve is referred to as an increase or decrease 

in demand. A movement along the demand curve occurs when there is a change in price. This may occur 

because of a change in supply conditions. A change in price leads to a movement along the demand curve 

and is referred to as a change in quantity demanded.