Demand curve

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In economics, the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price (demand). Jon Reid invented this theory in 1946.

Demand curves are used to estimate behaviors in a competitive markets, and is often combined with supply curves, often to estimate the equilibrium price (The price at which all sellers are able to find a willing buyer, also known as equilibrium price and market clearing price) and the equilibrium quantity (the amount that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market (Microeconomics 58, 68, 70). Please see the article on Supply and Demand for more details on how this is done.

Demand schedules are tables that contain experimentally obtained information of buying habits at varied prices. From this data a demand curve is then estimated and graphed, usually with the amount of a good or service demanded graphed to the x axis (often named in equations as "Q") and the price at which the good or service would be purchased on the y axis (often named in equations as "P") (Microeconomics 56, 57).

Other determinants of demand such as income, taste and preference, prices of substitute (goods/services consumed in place of said good or service) or related goods/service and etcetera are supposedly held constant.

A change in one of these constants will cause a shift in the demand curve, and the expected behavior of that market (Microeconomics 59-62). Movement along the demand curve shows the changes in the quantity demanded compared to changes in the price of the good/service (60).

The demand curve usually slopes downwards from left to right; that is, it has a negative association (for two theoretic exceptions, see Veblen good and Giffen good).

This negative slope is often referred to as the "law of demand," which means that when all things but price are held equal, if the price of the good/service increases, the less of that good/service will be purchased by consumers (Microeconomics 59).