All else equal, a higher price leads to a lower quantity demanded, and a lower price leads to a higher quantity demanded.

A shift of the entire demand curve caused by a non-price determinant, such as income, preferences, expectations, related-good prices, or number of buyers.

The total quantity demanded by all buyers at each price; it is found by horizontally summing individual quantities.

The quantities of a good or service that consumers are willing and able to buy at various prices, holding other relevant factors constant.

A product used together with another product.

A product that can be used in place of another product.

A good for which demand increases as consumer income increases.

Reading the Demand Curve — Microeconomics Week 2: Supply, Demand, and Market Equilibrium

1. Start with a Demand Schedule

What a demand schedule shows

A demand schedule lists the quantity consumers are willing and able to buy at different prices, while other relevant factors are held constant.

Read price-quantity pairs

If smoothies cost $4 and quantity demanded is 35 per week, the schedule says consumers would buy 35 smoothies per week at that price.

Demand requires ability

Demand is more than desire. Consumers must both want the product and have the purchasing power and access needed to buy it.

2. Plot the Schedule as a Demand Curve

Set up the axes

Place quantity demanded on the horizontal axis and price on the vertical axis. This convention lets you see how quantity changes as price changes.

Plot each observation

For the smoothie schedule, plot `(10, $8)`, `(20, $6)`, `(35, $4)`, and `(55, $2)`. Each point represents one possible buying decision.

Read the shape

Connecting the points creates a downward-sloping curve: it moves from upper left to lower right. This shape reflects the law of demand.

3. Why the Curve Slopes Downward

The law of demand

Ceteris paribus, a higher price is associated with a lower quantity demanded, while a lower price is associated with a higher quantity demanded.

Substitution and income effects

A higher price encourages consumers to switch to substitutes and also reduces what their budgets can buy. Both effects can reduce purchases of the good.

Marginal benefit

Extra units usually provide less additional satisfaction than earlier units. Consumers are therefore typically willing to buy more units only when the price falls.

4. Read a Point on the Curve

Quick Practice

A student sees this point on a concert-ticket demand curve:

Price: $40 per ticket
Quantity demanded: 120 tickets per day

Before revealing your answer, state the complete interpretation in one sentence.

Check yourself: At a price of $40 per ticket, consumers are willing and able to buy 120 tickets per day, assuming other demand determinants are unchanged.

Do not reverse the variables: the point does not mean that 120 tickets cost $40 each in total.

5. Movement Along the Curve: Quantity Demanded Changes

One curve, different points

When a product's own price changes, consumers move to a different point on the same demand curve. This is a change in quantity demanded.

Example: price falls

When smoothie price falls from $6 to $4, quantity demanded rises from 20 to 35 per week. Move downward and rightward along the curve.

Use exact terminology

Say an increase in quantity demanded when price falls. Reserve change in demand for a shift of the entire curve caused by a non-price factor.

6. Check: Movement or Shift?

Choose the most accurate description of the event.

The price of movie tickets falls from $15 to $10, and more tickets are purchased. What occurred?

An increase in quantity demanded: movement along the demand curve
An increase in demand: a rightward shift of the demand curve
A decrease in quantity demanded: movement along the demand curve
A decrease in demand: a leftward shift of the demand curve

Show Answer

Answer: A) An increase in quantity demanded: movement along the demand curve

The movie ticket's own price changed. Holding other factors constant, consumers move to a new point on the existing demand curve, so quantity demanded increases.

7. Demand Shifts: The Whole Curve Moves

What creates a shift?

A non-price determinant changes, so consumers choose different quantities at every price. The entire demand curve shifts rather than moving along itself.

Income and related goods

Higher income raises demand for normal goods but lowers it for inferior goods. Substitutes and complements also affect demand through their prices.

Direction of the shift

An increase in demand shifts the curve right: more is demanded at every price. A decrease in demand shifts it left.

8. Diagnose a Real-World Scenario

Identify what changed

Protected scooter lanes change consumers' preferences and the product's perceived usefulness. The scooter's own price remains $500.

Apply the test

If more scooters are desired at $500 and at other prices, the result is not a movement along the curve. It is a change in demand.

Reach the conclusion

Demand for scooters shifts rightward. By contrast, a fall in scooter price alone produces an increase in quantity demanded along the same curve.

9. Individual Demand and Market Demand

Two levels of demand

An individual demand curve represents one buyer. A market demand curve represents the combined buying plans of all consumers in that market.

Add quantities horizontally

At a price of $4, if Alex demands 3 units and Jordan demands 4, market demand is `3 + 4 = 7` units. Add quantities, not prices.

Why market demand can shift

When new buyers enter a market, total quantity demanded rises at every price. This shifts the market demand curve rightward.

10. Key Terms Review

Flip each card, then use the final contrast to check your precision.

Demand schedule: A table showing quantities consumers are willing and able to buy at different prices, holding other factors constant.
Law of demand: All else equal, a higher price leads to a lower quantity demanded, and a lower price leads to a higher quantity demanded.
Change in quantity demanded: A movement along the same demand curve caused by a change in the good's own price.
Change in demand: A shift of the entire demand curve caused by a non-price determinant, such as income, preferences, expectations, related-good prices, or number of buyers.
Market demand: The total quantity demanded by all buyers at each price; it is found by horizontally summing individual quantities.
Substitute and complement: A substitute is an alternative product, such as tea for coffee. A complement is used with another product, such as printers and ink.

Key Terms

demand: The quantities of a good or service that consumers are willing and able to buy at various prices, holding other relevant factors constant.
complement: A product used together with another product.
substitute: A product that can be used in place of another product.
normal good: A good for which demand increases as consumer income increases.
demand curve: A graph of the relationship between a good's price and the quantity demanded.
inferior good: A good for which demand decreases as consumer income increases.
law of demand: The principle that quantity demanded generally falls when price rises, and rises when price falls, all else equal.
market demand: The sum of quantities demanded by all consumers at each price.
demand schedule: A table that shows the relationship between price and quantity demanded.
change in demand: A shift of the entire demand curve caused by a change in a non-price determinant.
individual demand: The quantity a single consumer is willing and able to buy at each price.
quantity demanded: The specific amount consumers are willing and able to buy at one particular price.
change in quantity demanded: A movement along an existing demand curve caused by a change in the good's own price.