Demand
Demand
- Demand = the quantity buyers are willing and able to buy at each price.
- The law of demand: price up → quantity demanded down (and vice versa).
- So the demand curve slopes downward.
Practice
The law of demand says that when price rises, quantity demanded:
Price and quantity demanded move in opposite directions, so the demand curve slopes down.
Shifts of demand
- A change in the good's own price = a movement along the curve.
- Other causes shift the whole curve:
- income (most goods: higher income → more demand),
- the price of a substitute (rises → demand for this good rises),
- the price of a complement (rises → demand for this good falls),
- tastes, population, advertising.
Practice
Which causes a SHIFT of the demand curve (not a movement along it)?
Own-price change = movement along; income, related prices and tastes shift the whole curve.
Marginal utility
- Utility = satisfaction; marginal utility = the extra from one more unit.
- Diminishing marginal utility: each extra unit gives less extra satisfaction → you'll only buy more at a lower price. This is why demand slopes down.
Practice
Diminishing marginal utility helps explain why the demand curve slopes downward.
Later units give less extra satisfaction, so buyers only take more at a lower price.
You've got it
Key idea
- demand = willing and able to buy; the law of demand → downward curve
- own price = movement along; income/related prices/tastes = shift
- diminishing marginal utility explains the downward slope