2.1.1 Effective demand
Definition: Effective demand is the willingness and ability of consumers to buy a product at a given price over a given period of time. Wanting a product is not enough; the consumer must also be able to pay for it.
Definition: Law of demand: as the price of a good rises, quantity demanded falls, ceteris paribus (the demand curve slopes downward). Law of supply: as price rises, quantity supplied rises, ceteris paribus (the supply curve slopes upward) because higher prices raise profitability and attract more output.
Example: Many students want an iPhone, but only those willing and able to pay ₹80,000 have effective demand for it.
Analysis chain (AO2): Demand must be backed by the ability to pay → wants without income do not affect the market → only effective demand influences price and quantity.
🔒 Also in the full notes
- 2.1.2 Individual and market demand and supply
- 2.1.3 Determinants of demand
- 2.1.4 Determinants of supply
- 2.1.5 Causes of a shift in the demand curve (D)
- 2.1.6 Causes of a shift in the supply curve (S)
- 2.1.7 Shift in the curve versus movement along the curve
- Exam practice: 6 practice questions
- 3 exemplar answers with full model answers and mark breakdowns
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