Demand curve

Definition

The demand curve is a graphical representation showing the relationship between the price of a good and the quantity demanded. It typically slopes downward, indicating that as the price decreases, the quantity demanded increases, and vice versa.

5 Must Know Facts For Your Next Test

1. The demand curve can shift due to changes in non-price factors such as consumer preferences, income levels, and prices of related goods.
2. A movement along the demand curve occurs when there is a change in the price of the good itself.
3. The law of demand states that there is an inverse relationship between price and quantity demanded, all else being equal.
4. Elasticity of demand measures how responsive quantity demanded is to a change in price; if the demand is elastic, consumers are more sensitive to price changes.
5. Market demand curves are derived from individual demand curves by summing up all individual quantities demanded at each price level.

Review Questions

• What causes a shift in the demand curve?
• How does elasticity affect consumer responsiveness to price changes along the demand curve?
• Explain what happens to the quantity demanded when there is a movement along the demand curve.

Related terms

Supply Curve: A graphical representation showing the relationship between the price of a good and the quantity supplied.

Equilibrium Price: The market-clearing price where quantity supplied equals quantity demanded.

Price Elasticity of Demand: A measure of how much the quantity demanded of a good responds to a change in its price.