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Demand shifts with income, tastes, population, the prices of substitutes and complements, advertising and expected future prices. 12 questions answered.
Factors Influencing Demand is part of How prices are determined in GCSE AQA Economics.
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Demand shifts with income, tastes, population, the prices of substitutes and complements, advertising and expected future prices. 12 questions answered.
Use this lesson to stay inside How prices are determined while connecting the detail back to the wider How markets work topic.
Read the core explanations from Factors Influencing Demand before testing yourself from memory.
Imagine you walk past a shop and see a jacket you love for £120. You really want it, but you only have £30 in your account. Do you 'demand' that jacket? In everyday language, yes -- you want it. But in economics, the answer is no. Demand means more than just wanting something. It means being both willing AND able to buy it at a given price. This is what economists call effective demand.
So when we talk about 'demand' in economics, we always mean effective demand. Millions of people might want a Ferrari, but only a tiny number can actually afford one. The demand for Ferraris in the UK is measured by how many people are willing and able to buy one at the current price -- not how many people dream about owning one.
Price is the most obvious factor affecting demand -- we will cover that in detail in the next lesson on demand curves. But beyond price, there are several non-price factors that can cause overall demand for a product to change. These are sometimes called the 'conditions of demand', and they are crucial for your GCSE exam. Let's go through each one.
When people earn more money, they tend to buy more of most goods. If your parents get a pay rise, your family might eat out more often, upgrade the car, or book a nicer holiday. These are called normal goods -- demand rises as income rises.
But not all goods behave this way. Some goods see demand fall when incomes rise. Think about supermarket value-brand baked beans. When people have more money, they might switch to Heinz instead. These are called inferior goods -- demand falls as income rises. The key is that consumers trade up to something they see as better quality.
What people want changes over time, and this has a big impact on demand. Fashion trends, health awareness, social media influencers, and cultural shifts all shape consumer preferences.
For example, demand for plant-based milk in the UK has surged in recent years. Oat milk sales grew by over 100% between 2020 and 2023, driven by health consciousness, environmental concerns, and social media trends. Meanwhile, demand for traditional dairy milk has been gradually declining. Neither of these changes was caused by price -- they were caused by changing tastes and preferences.
More people means more consumers, which generally means higher demand. The UK population has grown from around 59 million in 2000 to over 67 million today. This has increased demand for housing, food, healthcare, and transport.
But it is not just the size of the population that matters -- the structure matters too. The UK has an ageing population, which increases demand for healthcare services, retirement homes, and pharmaceuticals. Meanwhile, areas with younger populations (like university cities) see higher demand for student accommodation, nightlife, and fast food.
Substitutes are goods that can be used in place of each other. If the price of one substitute rises, demand for the other tends to increase. Think about streaming services: Netflix and Disney+ are substitutes. If Netflix raises its subscription price from £10.99 to £13.99 per month, some customers will cancel and switch to Disney+, increasing demand for Disney+.
Other examples of substitutes include Uber and black cabs, butter and margarine, and Samsung and Apple phones. The closer the substitutes, the more sensitive demand will be to price changes in the rival product.
Complements are goods that are used together. If the price of one complement rises, demand for the other tends to fall. Consider cars and petrol: if petrol prices rise sharply (as they did in 2022, reaching over £1.90 per litre), some people will drive less or delay buying a new car. Demand for cars falls because the cost of running them has increased.
Other examples of complements include game consoles and games, printers and ink cartridges, and smartphones and phone cases. This is why companies like Gillette sell razors cheaply but charge a lot for replacement blades -- the razor and blades are complements.
Successful advertising increases demand by making consumers more aware of a product, changing their preferences, or creating brand loyalty. UK firms spend billions on advertising each year. Think about how many times you see adverts for fast food, trainers, or mobile phones -- all designed to increase demand.
A strong example is the 'Go Compare' or 'Compare the Market' adverts. These comparison website ads increased demand for their services enormously by creating memorable characters (like Aleksandr the meerkat). Similarly, Apple's advertising helps maintain high demand for iPhones despite premium pricing. Effective advertising can shift demand significantly even when price stays the same.
If consumers expect prices to rise in the future, they may buy more now. If they expect prices to fall, they may delay purchasing. This is especially important for big purchases like houses and cars.
During the UK housing market boom, many first-time buyers rushed to purchase homes because they expected prices to keep rising -- 'if I don't buy now, I won't be able to afford it later'. This expectation actually increased current demand, which in turn pushed prices up further. Conversely, when consumers expect sales (like Black Friday), they may hold off buying, temporarily reducing demand in the weeks beforehand.
| Factor | Effect on Demand (Increase) | Effect on Demand (Decrease) | UK Example |
|---|---|---|---|
| Income (Normal Good) | Income rises -> Demand rises | Income falls -> Demand falls | Demand for restaurant meals rises when wages increase |
| Income (Inferior Good) | Income falls -> Demand rises | Income rises -> Demand falls | Demand for Tesco Value range rises during recessions |
| Tastes & Preferences | Product becomes more fashionable/desirable | Product falls out of fashion | Rising demand for oat milk due to health trends |
| Population | Population grows | Population shrinks or ages | UK population growth increases housing demand |
| Price of Substitutes | Price of substitute rises | Price of substitute falls | Netflix price rise increases Disney+ demand |
| Price of Complements | Price of complement falls | Price of complement rises | Cheaper game consoles increase demand for games |
| Advertising | Successful advertising campaign | Competitor's successful advertising | Compare the Market ads boosted website demand |
| Expectations | Expected future price rises | Expected future price falls | House buyers rush to buy before expected price rises |
Worked example: Explaining a Change in Demand
Explain two reasons why demand for electric cars in the UK has increased in recent years. (4 marks)
Method: Identify two distinct demand factors and apply them to the electric car market with real-world context.
Answer: Demand for electric cars has increased due to (1) changing consumer tastes driven by environmental awareness and government policy signalling, and (2) the falling relative cost of running an electric car compared to petrol vehicles, supported by government subsidies.
Worked example: Analysing the Impact of a Substitute's Price Change
In 2023, Netflix increased its standard UK subscription price from £10.99 to £12.99 per month. Analyse how this price change might affect the demand for rival streaming services such as Disney+ and Amazon Prime Video. (6 marks)
Method: Use the concept of substitute goods to build a chain of analysis, then evaluate the extent of the impact.
Answer: The Netflix price rise is likely to increase demand for substitute streaming services like Disney+ and Amazon Prime, as some price-sensitive consumers will switch. However, the extent depends on brand loyalty, content exclusivity, and how close consumers perceive the substitutes to be.
In real markets, demand rarely changes because of just one factor. Usually, several factors work together. For example, demand for electric cars has increased due to changing tastes (environmental awareness), government advertising campaigns, expectations of future petrol car bans, rising petrol prices (complement), and rising incomes making the higher purchase price affordable. Being able to identify multiple factors and explain how they interact is a key skill for your exam.
Remember the exam tip: whenever you are asked to explain a change in demand, always (1) identify the specific factor, (2) explain how it affects willingness or ability to buy, and (3) use a real-world example if possible. This three-step approach will help you build the chains of reasoning that examiners reward.
Published by Revise Right. Use the official specification reference to check the requirements for your course. Content updated: 2026-03-24.
Move to the related lessons or back to the topic page when you need the wider sequence before exam-style practice.
Gillette sells razors cheaply but charges a lot for replacement blades because razors and blades are complements, goods used together. Other complements include game consoles and games, printers and ink cartridges, and smartphones and phone cases.
Examples of normal goods are branded clothing, restaurant meals and electric cars, for which demand increases when consumer income rises. Most goods are normal goods: when parents get a pay rise, a family might eat out more often, upgrade the car or book a nicer holiday.
Effective demand is demand backed by purchasing power: the quantity of a good or service consumers are willing and able to buy at a given price over a given time period. A person who wants a £120 jacket but has only £30 does not demand it in economics, just as millions might want a Ferrari but only a tiny number can afford one.
The conditions of demand are the non-price factors that change overall demand for a product: income, tastes and preferences, population, the price of substitute goods, the price of complementary goods, advertising and expectations of future prices. A change in any of them changes demand even when the product's own price stays the same.
Successful advertising increases demand by making consumers more aware of a product, changing their preferences or creating brand loyalty, so demand can shift significantly even when price stays the same. Compare the Market's adverts, with Aleksandr the meerkat, increased demand for its service enormously, and Apple's advertising helps maintain demand for iPhones despite premium pricing.
If consumers expect prices to rise, they may buy more now, and if they expect prices to fall, they may delay purchasing. During the UK housing market boom, first-time buyers rushed to buy because they expected prices to keep rising, which pushed prices up further, while expected Black Friday sales can temporarily reduce demand in the weeks beforehand.
Demand for electric cars has increased because consumer tastes have shifted with environmental awareness, reinforced by the government's announcement to ban the sale of new petrol and diesel cars, and because charging is significantly cheaper per mile than petrol, especially after petrol prices spiked in 2022. Subsidies such as the former Plug-in Car Grant also helped.
A Netflix price rise is likely to increase demand for Disney+ and Amazon Prime Video, because they are substitute goods providing on-demand streaming entertainment. Price-sensitive consumers such as students may switch, though Netflix's brand loyalty and exclusive content, such as Stranger Things and Squid Game, may limit the effect.
UK population growth, from around 59 million in 2000 to over 67 million today, has increased demand for housing, food, healthcare and transport. Population structure matters too: university cities with younger populations see higher demand for student accommodation, nightlife and fast food.
Demand for oat milk in the UK has surged, with sales growing by over 100% between 2020 and 2023, driven by health consciousness, environmental concerns and social media trends, while demand for traditional dairy milk has been gradually declining. Neither change was caused by price; both came from changing tastes and preferences.
Value brands such as the Tesco Value range sell more in a recession because they are inferior goods: when incomes fall, demand for them rises. When incomes rise, consumers switch to higher-quality alternatives, such as Heinz instead of value-brand baked beans.
How close substitutes are matters because the closer two substitutes are, the more sensitive demand will be to price changes in the rival product. Uber and black cabs, butter and margarine, and Samsung and Apple phones are substitutes, so a price rise in one tends to increase demand for the other.