Demand Curve

What is a Demand Curve?

A Demand Curve is a graphic representation of the demand schedule. It shows the relationship between the price of a good or service and the quantity demanded over a period. Typically, the demand curve slopes downward from left to right, indicating that consumers are willing to purchase higher quantities at lower prices and lower quantities at higher prices.

Key Features:

Axes: Price is plotted on the vertical axis and quantity on the horizontal axis.
Slope: Most demand curves slope downwards from left to right (negative slope), reflecting the Law of Demand.

Examples of Demand Curves

Basic Demand for Laptops: If the price of a laptop falls from $1000 to $800, the quantity demanded might increase from 100 units to 150 units, resulting in a downward-sloping demand curve.
Seasonal Demand for Ice Cream: During summer, the demand for ice cream might be higher at each price point compared to winter, resulting in a steeper downward slope during hotter months.

Frequently Asked Questions

What factors cause a shift in the demand curve?

Factors such as changes in consumer income, tastes and preferences, prices of related goods, expectations of future prices, and the number of buyers can cause the demand curve to shift either right (increase in demand) or left (decrease in demand).

How does a movement along the demand curve differ from a shift of the demand curve?

Movement Along the Demand Curve: Occurs when there is a change in the quantity demanded due to a change in the price of the product itself.
Shift of the Demand Curve: Occurs when the demand for a product changes due to factors other than the product’s price.

What is the Law of Demand?

The Law of Demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and as the price increases, the quantity demanded decreases.

Demand Schedule: A table that shows the quantity demanded at different prices.
Elasticity of Demand: Measures how responsive the quantity demanded is to a change in price.
Supply Curve: A curve that shows the relationship between the price of a good and the quantity supplied.

Online Resources

Suggested Books for Further Studies

“Principles of Economics” by N. Gregory Mankiw
“Economics” by Paul Samuelson and William Nordhaus
“Microeconomics” by Robert S. Pindyck and Daniel L. Rubinfeld

Fundamentals of Demand Curve: Economics Basics Quiz

### What does a demand curve illustrate? - [x] The relationship between price and quantity demanded. - [ ] The relationship between price and quantity supplied. - [ ] The total revenue at different prices. - [ ] The market equilibrium price. > **Explanation:** A demand curve illustrates the relationship between the price of a good or service and the quantity demanded by consumers. ### What typical shape does a demand curve have? - [x] Downward sloping from left to right. - [ ] Upward sloping from left to right. - [ ] Horizontal line. - [ ] Vertical line. > **Explanation:** The demand curve typically slopes downward from left to right, indicating that lower prices lead to higher quantities demanded. ### Which axis represents quantity in a demand curve? - [ ] Vertical axis - [x] Horizontal axis - [ ] Both axes - [ ] Neither axis > **Explanation:** In a demand curve, the quantity demanded is represented on the horizontal axis. ### What causes a shift of the demand curve to the right? - [x] Increase in consumer income - [ ] Increase in the price of the good - [ ] Decrease in the number of buyers - [ ] Decrease in consumer preferences for the good > **Explanation:** An increase in consumer income generally causes a shift of the demand curve to the right, indicating an increase in demand at each price level. ### A movement along the demand curve is best explained by: - [x] A change in the price of the product. - [ ] A change in consumer income. - [ ] A change in consumer tastes and preferences. - [ ] A change in the price of related goods. > **Explanation:** A movement along the demand curve is caused by a change in the price of the product itself, leading to a change in quantity demanded. ### What term refers to the percentage change in quantity demanded resulting from a one percent change in price? - [x] Price Elasticity of Demand - [ ] Supply Elasticity - [ ] Market Equilibrium - [ ] Marginal Utility > **Explanation:** Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. ### Why might the demand curve for a luxury car be steep? - [ ] Because luxury cars are highly elastic. - [x] Because luxury cars have low price elasticity. - [ ] Because luxury cars are considered inferior goods. - [ ] Because luxury cars have perfect substitutes. > **Explanation:** A steep demand curve for luxury cars indicates that consumers' quantity demanded is relatively insensitive to price changes, showing low price elasticity. ### Which factor does NOT cause a shift in the demand curve? - [ ] Change in consumer income - [x] Change in the price of the product - [ ] Change in consumer preferences - [ ] Change in the number of buyers > **Explanation:** A change in the price of the product results in a movement along the demand curve rather than a shift of the demand curve. ### What results from an increase in the number of consumers in a market? - [x] The demand curve shifts to the right. - [ ] The demand curve shifts to the left. - [ ] Movement along the demand curve up. - [ ] Movement along the demand curve down. > **Explanation:** An increase in the number of consumers leads to more demand at each price level, causing the demand curve to shift to the right. ### What can we infer if the demand curve shifts to the left? - [x] There is a decrease in demand. - [ ] There is an increase in demand. - [ ] Prices have decreased. - [ ] Supply has decreased. > **Explanation:** A shift of the demand curve to the left indicates a decrease in demand at each price level.

Thank you for engaging in our detailed study of the demand curve and tackling our illustrative quiz questions. Keep honing your economic knowledge!