The Demand Curve The Relationship between Price and Quantity Demanded

The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. As we will see, many things determine the quantity demanded of any good, but when analyzing how markets work, one determinant plays a central role—the price of the good. If the price of ice cream rose to $20 per scoop, you would buy less ice cream. You might buy frozen yogurt instead. If the price of ice cream fell lo 311.20 per sox>p, you would buy more. This relationship between price and quantity demanded is true for most goods in the economy and. in fact, is so pervasive that economists call it the law of demand: Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded ri*,-s.

The table in Figure 1 shows how many ice-cream concs Catherine buys cach month at different prices of ice cream. If ice cream is free, Catherine eats 12 cones per month. At 3030 per oone, Catherine buys 10 cones each month As the price rises further, site buys fewer and fewer cones. When the price reaches 33.00, Catherine doesn't buy any ice cream at all. This tabic is a demand schedule. a table that shows the relationship between the price of a good and the quantity demanded, holding constant everything else that influences how much consumers of the good want to buy.

quantity demanded the amount of a good that buyers are viifcng and ab!e to purchase law of d«nv>nd the claim that, othor things <K*ual. the tlty dematvded of a geed falls when tho pric* of th* good riws demand schedule « Hbl« Out show« th* relationship between the fxicc of a good and the quantity demanded domand curvo a graph of the relatiorv-ship between the price of a good and the quantity demanded

The graph in Figure 1 uses the numbers from the fable to illustrate the law of demand. By convention, the price of ice cream is on the vertical axis, and the quantity of ice cream demanded is on the horizontal axis. The downward-sloping line relating price and quantity demanded is called the demand curve.

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