Demand Curve - Explained
What is the Demand Curve?
Written by Jason Gordon
Updated at March 26th, 2023
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What is a Demand Curve?
The demand curve graphically showcases the relationship between the demand of a specific product or service and its price for a certain time period. In the graph, the price of the good or service is represented on the vertical side, and the quantity demanded on the horizontal side.
Back to:ECONOMIC ANALYSIS & MONETARY POLICY
How does the Demand Curve Work?
The demand curve revolves around the law of demand, and has a downward movement from left to right. This means that with the increase in the price of a good or service, the demand reduces, other things remaining constant.
Exception to the demand curve
The demand curve that establishes a relation between the quantity demanded and the price of goods follows some exceptions. The first one involves giffen goods that involves the rise in their price will create more demand, and vice-versa. Giffen goods include staple food items such as rice, wheat, etc. that dont have any perfect replacements. These goods demand is represented in an upward slope which goes in contrast to the demand curve that moves downward. Hence, in case of giffen goods, people wont tend to find substitute products when there is a price hike, and the increase in price will create more consumer demand.
Related Topics
- Self Interest
- Cost-Benefit Analysis
- Enlightened Self-Interest
- Fisher's Separation Theorem
- Ratchet Effect
- Total Utility (Economics)
- Efficiency Principle
- Expected Utility
- Subjective Theory of Value
- Positional Goods
- Utilitarianism
- Indifference Curve
- Time Preference Theory of Interest
- Incentives
- Marginal Benefit
- Diminishing Marginal Utility
- Sunk Costs
- Production Possibilities Frontier
- Law of Diminishing Returns
- Economic Efficiency
- Efficiency Theory
- Productive Efficiency
- Capacity Utilization Rate
- Allocative Efficiency
- Pareto Efficient
- Comparative Advantage
- Criticisms of the Economic Approach
- Behavioral Economics
- Normative Economics
- Positive Economics
- Invisible Hand
- Sunk cost
