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Demand Curve

Definition

The demand curve shows the relationship between price and quantity demanded by consumers in a market. It illustrates how much buyers are willing and able to purchase at different price levels.

Analogy

Imagine you're at a yard sale with limited funds. As prices decrease (go down), you become more willing and able to buy more items (move up on the demand curve). However, as prices increase (go up), your willingness and ability to purchase decreases (move down on the demand curve).

Related terms

Law of Demand: The law of demand states that as the price of a good or service increases, the quantity demanded decreases, assuming all other factors remain constant.

Elasticity of Demand: Elasticity of demand measures how responsive quantity demanded is to changes in price. If demand is elastic, it means that even small price changes lead to significant shifts in quantity demanded.

Substitute Goods: Substitute goods are products that can be used as alternatives for each other. When the price of one substitute good increases, consumers tend to switch their purchases towards cheaper substitutes.