Demand
… one side of a
product or factor
market
Demand is
… a record of how people's
buying habits change in
response to price
… a whole series of
quantities that a consumer
will buy at the different prices
How do we decide what we
want?
• A Desire for Goods and
Services (willingness)
• A Means to purchase those
Goods and Services (ability)
Law of Demand
• the price of a product (or
service) is inversely related
to the quantity demanded,
other things constant.
A Demand
Schedule
PRICE
QUANTITY
$5
9
4
10
3
12
2
15
1
20
Demand Curve
• a diagram showing the
relationship between the
price of a good and the
quantity demanded per
period of time.
The axes of the graph
are price (vertical) and
quantity (horizontal).
Each price and quantity
pair becomes a pair of
coordinates for a
demand curve.
P
r 5
i
c 4
e
3
2
1
Demand
9 10 12
15
20
Quantity
Change in Demand
• Change in Demand - a change in
the desire or means to purchase
the good, thus there is a change
in quantity demanded at EVERY
price.
• Change in Demand means a shift
of the demand curve
Change in Demand
• Changes in Demand…shift in the
curve
– Increase in demand - demand
curve shifts to the right
– Decrease in demand - demand
curve shifts to the left
Increase in
Demand
P
Price
Demand curve
shifts to the right
D1
Do
O
Q0
Quantity
Decrease in
Demand
Demand curve
shifts to the left
Price
P
D0
D1
O
Q0
Quantity
Demand shifts are due to:
• Taste and preferences
• Price of Related goods
—Complements and substitutes
• Income—Normal and Inferior
• Consumer Information
• Future Price Expectations
• Number of Buyers
Change in Quantity Demanded
• Change in Quantity Demanded (Qd) - is
movement along a demand curve
• Changes in quantity demanded can only
be caused by a change in the price of the
good.
• Increase in Qd - a movement to the right
along a demand curve
• Decrease in Qd - a movement to the left along
a demand curve
P
Price
moves
up…
A decrease in
quantity demanded
caused by a price
increase
Demand
Quantity
demanded
decreases
Q
P
Price
moves
down…
An increase in
quantity demanded
caused by a price
decrease
Demand
Quantity
demanded
increases
Q
Market Demand Curve
• shows the relationship between the
price of a good and the total quantity
demanded by all consumers in the
market per period of time.
• Market demand curves are obtained
by summing the demand curves of
individual consumers.
Be sure that you can…
• Define ‘demand’
• Distinguish between “a change in quantity
demanded” and “a change in demand”
• Draw a correctly labeled demand curve and
can show
– A change in quantity demanded
– An increase/decrease in demand