A) Movements along and shifts of the demand curve

Movements along a demand curve are caused by changes in price. As the price of a good falls, the quantity demanded will usually increase. In contrast, an increase in price will normally cause the quantity demanded to decrease.

For example, if price falls from P1 to P2, quantity demanded rises from Q1 to Q2. This is an extension in demand and represents a movement along the existing demand curve.

A shift of the demand curve is different. It occurs when a non-price factor changes demand, meaning consumers want to buy a different quantity at the same price.

B) Factors that may cause a shift in the demand curve

• Changes in real incomes – If consumers’ incomes rise, they may be able to purchase more goods and services, increasing demand for many products.
• Changes in tastes and fashions – If a product becomes more fashionable or desirable, demand for it is likely to increase.
• Advertising and branding – Successful advertising may make more consumers aware of a product and increase demand.

C) Diminishing marginal utility

Marginal utility is the additional utility or benefit gained from consuming one more unit of a good or service.

Marginal utility will usually decrease as more units are consumed. For example, if somebody is very thirsty, their first glass of water is likely to provide more additional utility than their second glass.

What the full guide adds

For this topic, the full AS guide also covers:

• Prices of substitutes and complementary goods as conditions of demand.
• Changes in the size and age distribution of the population and the effect of weather on demand.
• The full diminishing marginal utility explanation, including what happens as additional units are consumed.
• How diminishing marginal utility helps explain the downward-sloping demand curve.