Economics - Term 1 - Week 6

Picture yourself waiting at the busy taxi rank in Khayelitsha after school. The line is long, and taxi fares have jumped from R15 to R25 because it’s peak hour. Suddenly, you notice fewer people are willing to pay the higher price, and some decide to walk or wait for fares to drop. This is a perfect example of the law of demand in action: as price increases, the quantity demanded decreases, and as price decreases, the quantity demanded increases. The law of demand is not just a textbook idea—it explains why your favourite kota shop in Mthatha sells more kotas when prices are low, and fewer when prices go up. Demand is not just about what people want; it’s about what they are both willing and able to buy at a specific price. A common misconception is thinking that demand means desire alone, but if you want a new phone but cannot afford it, you are not part of the demand for that phone. Demand always includes both willingness and ability to pay.

Sipho, who runs a vetkoek stand in Polokwane, keeps track of how many vetkoeks he sells at different prices. At R2 each, he sells 50; at R4, he sells 30; and at R6, only 10. This information forms a demand schedule—a table showing the quantities demanded at different prices. To turn this into a demand curve, you plot price on the vertical (y) axis and quantity on the horizontal (x) axis. Each price-quantity pair becomes a point on the graph: (50,2), (30,4), (10,6). Connecting these dots gives you a downward-sloping line, which is the demand curve. This curve shows the inverse relationship between price and quantity demanded. Many learners mistakenly swap the axes, putting price on the horizontal axis and quantity on the vertical—remember, price always goes up and down (vertical), and quantity goes left and right (horizontal). Getting this right is crucial for full marks in exams.

During load-shedding in Durban, the price of candles rises. If people buy fewer candles simply because the price has gone up, that’s a movement along the demand curve. But imagine Banyana Banyana wins a major match and suddenly everyone wants to celebrate with cold drinks, so more cold drinks are bought at every price. That’s a shift of the demand curve to the right. Movements along the curve happen only when the price of the product itself changes, with all other factors held constant. Shifts of the demand curve occur when something else changes, like income, tastes, or the price of related goods. Many learners confuse these two: remember, only a change in the product’s own price causes movement along the curve, while changes in other factors cause the whole curve to shift left or right. This distinction is often tested in NSC exams.

Step 1: Write down the demand schedule. For example, Ahmed’s kota shop in Mthatha sells at these prices: R10 (40 kotas), R15 (30 kotas), R20 (20 kotas), R25 (10 kotas). Step 2: Label your axes. Price (R) goes on the vertical axis; quantity (kotas) on the horizontal axis. Step 3: Plot each price-quantity pair as a point: (40,10), (30,15), (20,20), (10,25). Step 4: Join the points with a smooth, downward-sloping line. This is your demand curve. Final answer: The demand curve slopes downwards, showing that as price rises, quantity demanded falls. Sanity check: Does the curve slope down? Yes—so it’s correct.

Step 1: Read the scenario. Taxi fares in Soweto rise from R15 to R20, and fewer people use taxis. Step 2: Ask: Did only the price change? Yes. Step 3: Conclude: This is a movement along the demand curve (from a higher quantity at R15 to a lower quantity at R20). Step 4: Now, suppose a new bus service starts, making taxis less popular at all prices. Step 5: Since demand falls at every price, this is a shift of the demand curve to the left. Final answer: Price change alone = movement; outside factor = shift. Sanity check: Did you check what changed? Yes.

Question: If the price of kotas in Durban rises from R12 to R18 and sales drop from 60 to 35, what happens on the demand curve? Let’s think: Only the price changed, so it’s a movement along the curve. The higher price caused a lower quantity demanded—a movement up along the demand curve. This is a classic example of the law of demand in action, where price and quantity demanded move in opposite directions. Your turn: If the price drops from R18 to R12 and sales rise from 35 to 60, what is this? Answer: A movement down along the demand curve, as price falls and quantity demanded rises. This shows the direct effect of price changes on quantity demanded.

Question: During load-shedding in Polokwane, more people buy candles at every price. What happens to the demand curve? Let’s reason: The change is not in price, but in a factor (load-shedding) affecting demand at all prices. The demand curve shifts to the right, showing an increase in demand. This means that at every price, more candles are being bought than before. Your turn: If load-shedding ends and fewer people buy candles at every price, what happens? Answer: The demand curve shifts to the left, showing a decrease in demand. This is because the external factor (need for candles) has changed.

1. Define demand in your own words, making sure to include both willingness and ability to pay. 2. List two factors (other than price) that can shift the demand curve, such as changes in income or consumer tastes. 3. State the law of demand using a local example, like how taxi fares affect the number of passengers in your area.

1. Given a demand schedule for vetkoeks (e.g., R2: 50, R4: 30, R6: 10), draw a demand curve with correct axes and labels. 2. Explain the difference between a movement along and a shift of the demand curve, using your own words and an example for each. 3. Predict what happens to the demand for minibus taxis if petrol prices fall and explain your reasoning.

1. Analyse how a major Springboks win could affect the demand for team jerseys in Soweto, and illustrate your answer with a demand curve showing the shift. 2. Justify whether a new competitor in the kota market causes a movement along or a shift of the demand curve, and explain why. 3. Solve: If the price of cold drinks rises from R10 to R15 and quantity demanded falls from 100 to 60, calculate the change in quantity demanded and interpret what this means for the demand curve.

• The desire for a product, regardless of ability to pay
• The quantity of a product people are willing and able to buy at a given price
• The total amount of goods in the market
• The price of a product set by the government

Answer: The quantity of a product people are willing and able to buy at a given price

Many confuse demand with desire, but demand requires both willingness and ability to pay. Just wanting something is not enough for demand to exist in economics. The correct definition always includes both the willingness and the financial means to make a purchase at a specific price.

• It will increase
• It will decrease
• It will stay the same
• It will double

Answer: It will decrease

According to the law of demand, higher prices lead to lower quantity demanded. This is because some people will no longer be willing or able to pay the higher fare, so fewer passengers use the taxis. Many learners mistakenly think demand stays the same, but price changes always affect quantity demanded.

• A change in the price of the product
• A change in consumer income
• A change in the quantity supplied
• A change in the weather only

Answer: A change in consumer income

Price changes cause movement along the curve, not a shift. When consumer income changes, people can afford to buy more or less at every price, causing the whole demand curve to move. Many learners confuse this with price changes, but only non-price factors shift the curve.

• It has decreased
• It has stayed the same
• It has increased
• It has disappeared

Answer: It has increased

Beef is a substitute for chicken. When chicken becomes more expensive, people switch to beef, increasing its demand at all prices. This is a classic example of how the price of a related good can shift the demand curve.