The Demand Curve

[phpzonsidebar title=”Books ” keywords=”Demand curve” num=”3″ country=”US” searchindex=”Books” trackingid=”mustbeautycom-20″ sort=”none” id=”2″]The demand schedule is a numerical tabulation that lists and shows the relationship between quantity demanded and prices. When a curve is drawn along X and Y axes to show the relationship between the quantity demanded and price for a given data, this is called the demand curve.

The curve can be individual or market. The individual curve shows the demand-price relationship of an individual consumer while the market demand curve is the horizontal sum of the individual demand curve of all consumers in the market. The market demand curve is also called the aggregate demand curve.

Shifts in the Demand Curve

The basic assumption of is “other things being equal”. But what if other variables like income, consumer tastes etc change? If other variables change, the shift is either to the right or the left on X and Y axes. Originally, the demand curve is drawn when other variable are held constant, but a shift in these “other” variables shifts the curve to a new position.

  1. Change in income: The rise in consumer income shifts the curve to the right in case of normal goods. But the rise income may shift it to the left in case of inferior goods.
  2. Change in the substitutes: The rise in in the price of other substitute price will shift it the to the right.
  3. Change in complimentary products: A fall in the price of complimentary products will shift it to the right.
  4. Change in distribution of income: A change in in the distribution of income will raise the demand of goods for some and lower for others.
  5. Environmental Changes: The environmental variables are numerous and may have a different effect on the curve depending on the change. For example, if the retirement age is reduced, the curve will shift to the right for leisure goods, but to the left for work goods.
  6. Change in tastes: If the taste changes in favour of the products, the shift is to the the right. If the taste in change is away from the product, the curve shifts to the left.

Points to Remember

  • Definition of Demand Curve
  • Elastic and in-elastic Demand Curve
  • Definition of Demand Schedule
  • Shifts in the Demand Curve
  • Shift to the right means more shall be purchased at a given price.
  • Shift to the left means less shall be purchases at a given price.
  • Market or aggregate demand curve is the sum total of the individual demand curves.
  • Demand schedule is in a tabular format, while the curve is represented graphically across X and Y axes.

Diagram showing shifts in Demand Curve

Diagram showing shifts in the demand curve

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One Response to “The Demand Curve”

  1. […] Like the demand curve, supply also changes with the variation in vairable.We have seen above the the quantity supplied is positively related to the market price. A shift in the Supply curve means that each change of the variables, a different quantity of a product will be bought. The shift may either be right or left. A right shift in the curve means that more goods shall be supplied while a left shift means less production of the same product. […]

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