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4 Cards in this Set
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The Demand Curve: The Relationship Between Price and Quantity Demanded |
The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. If the price of rape seed rose, people would buy fewer tonnes of rape seed. If the price of rape seed fell, people would buy more. |
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Law of Demand |
Because the quantity demanded falls as the price rises and rises as the price falls, we say that the quantity demanded is negatively related to the price. This relationship between price and quantity demanded is true for most goods in the economy and, in fact is so pervasive that ecnomists call it the law of demand |
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Demand schedule |
The demand schedule is a table that shows the relationship between the price and the quantity demanded. The downward sloping line relating price and quantity is called the demand curve. Because a lower price increases the quantity demanded, the demand curve sloped downwards |
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Market demand versus Individual demand |
The demand curve shows an individuals demand for a product. To analyse how market works, we need to determine the market demand, which is the sum of all individual demand for a particular good or service. The market demand at each price is the sum of the two individual demands. We sum the individual demand curve horizontally to obtain the market demand curve. The market demand curve shows how the total quantity demanded of a good changes as the price of good varies, while all the other factors that affects how much consumers want to buy, such as incomes and taste, amongst other things are held constant. |
