Syllabus: SQA - Higher Course Spec Economics
Module: Economics of the Market
Lesson: Theory of Demand

Introduction

The “Theory of Demand” is a foundational component of the SQA Higher Economics course, covered within the “Economics of the Market” unit. It helps students explore how consumers make decisions and how these choices shape market behaviour. Aligned with the SQA syllabus, this section supports learners to understand demand in both personal and broader economic contexts, including the role of price, utility, and market shifts. It’s a key building block for understanding everything from pricing strategy to government policy.

Key Concepts

The SQA Higher specification outlines the following key knowledge and skills around demand:

• Effective Demand: Students should understand the difference between wanting something and being able to afford and willing to buy it.

• Demand Schedules and Curves: Learners will interpret data to draw and describe demand curves, illustrating consumer behaviour at different price points.

• Law of Demand: As price increases, quantity demanded falls — all other things being equal.

• Utility: Including total, marginal, and diminishing marginal utility, helping explain why demand curves slope downwards.

• Movements vs Shifts:

  • Movements along the demand curve happen when the price changes.

  • Shifts occur due to non-price factors such as:

    • Income changes

    • Prices of substitute or complementary goods

    • Changes in tastes, trends, or advertising

    • Demographic changes or population size

These elements are often revisited when students explore supply and market equilibrium, building on their understanding of how economies allocate scarce resources.

Real-World Relevance

Demand theory comes alive when linked to everyday decisions. Take smartphones, for instance. When a popular brand launches a new model, demand spikes despite the high price, often due to strong branding or peer influence — overriding traditional expectations of falling demand at higher prices.

More recently, the rising cost of energy during inflationary periods has shown inelastic demand for essentials like electricity and heating. Even with significant price hikes, consumption doesn’t drop substantially — students can explore why that is using concepts like necessity goods and income elasticity.

Local examples also resonate: a supermarket promotion may lead to increased demand for a product, even if substitutes remain available. These scenarios bring the abstract concept into students’ day-to-day world.

How It’s Assessed

Assessment for this unit in the SQA Higher course comes through two main formats:

• Paper-based assessment tasks: These include structured short-answer and extended-response questions. Students will often be asked to:

  • Interpret and draw demand curves

  • Explain shifts versus movements along the curve

  • Evaluate the impact of price and non-price factors on demand

• Command words: Expect terms like describe, explain, analyse, and evaluate. These guide the depth of response required.

Students will be assessed not only on their definitions and diagrams but also on their ability to apply the concepts in real-world contexts — particularly important for higher-mark questions.

Enterprise Skills Integration

Understanding demand isn’t just about graphs — it’s about thinking like a decision-maker. This topic supports:

• Problem-Solving: Analysing market data and responding to changes in consumer behaviour.

• Critical Thinking: Assessing why demand changes and predicting its outcomes.

• Decision-Making: Evaluating what products to offer, at what price, and when — foundational for business planning or entrepreneurial thinking.

Mini-simulations or role-playing exercises (e.g. students acting as business owners responding to changing demand) can make this content active and memorable.

Careers Links

This topic supports Gatsby Benchmark 4 (Linking curriculum learning to careers) and Benchmark 5 (Encounters with employers and employees), especially when linked to:

• Retail and Sales: Where understanding consumer behaviour is core to success.

• Marketing and Advertising: Using demand theory to shape campaigns and pricing strategies.

• Data Analysis: Roles that involve interpreting customer behaviour, pricing models, or market trends.

Even less obvious paths — like public policy or environmental economics — draw on these concepts when assessing how consumers respond to initiatives such as sugar taxes or subsidies on green energy.

Teaching Notes

Top tips for teaching this content:

• Use data: Real-time examples from markets your students know (streaming subscriptions, trainer brands, fast food pricing) make it stick.

• Visuals matter: Get students drawing, adjusting, and explaining demand curves to build confidence.

• Avoid common pitfalls:

  • Students often confuse movement along the curve with shifts — reinforce with contrasting examples.

  • Utility is tricky. Frame it in practical terms — “the second chocolate bar isn’t as good as the first” usually works.

• Differentiation: Use scaffolding for drawing and interpreting diagrams. Extension students can explore elasticity or apply demand theory to niche markets (e.g. vintage clothing or NFTs).

• Suggested activity: Set a challenge where students act as entrepreneurs responding to changes in demand — what would they do differently with a new product?