2.1 Demand

Demand is the whole relationship between price and quantity demanded, holding everything else constant. The law of demand, higher price, lower quantity demanded, comes from the substitution effect (buyers switch to relatively cheaper alternatives), the income effect (higher prices shrink purchasing power), and diminishing marginal utility.

A change in the good's own price causes a movement ALONG the demand curve (a change in quantity demanded). A change in anything else shifts the entire curve (a change in demand): tastes, income, prices of substitutes and complements, expectations, and the number of buyers.

Income shifts depend on the type of good: higher income raises demand for normal goods but lowers demand for inferior goods. On the exam, always name the specific determinant that shifted demand, 'demand increased' with no reason earns no points on an FRQ.