Demand Curve

Demand curve is a graphical representation of the relationship between the price of a product or service and its quantity that consumers are able and willing to purchase at a given price within a given time period, provided other things such as consumer income, number of consumers, consumer tastes etc. remain constant.

Demand curve is drawn by plotting a series of pairs of price and the corresponding quantity-demanded from a demand schedule on a Cartesian coordinate system. Conventionally, price is measured along vertical axis of the graph whereas the quantity demanded is measured along the horizontal axis. The points plotted are then joined by trend line. The result is a downward sloped demand curve showing the inverse relationship between price and quantity demanded as stated in the law of demand.

Since demand curve clearly depicts the inverse relationship between price and quantity demanded, it is extensively used, often in combination with supply curve, to help better understand numerous economics concepts including equilibrium price and quantity, consumer and producer surplus, price ceilings and floors and market structures.

Example

Following is a demand schedule of a hypothetical product showing a series of prices and the corresponding quantities demanded per day:

As you can see, the demand schedule already indicates the inverse relationship between price and quantity demanded. But we can make it even more clear and visual by generating a scatter chart from the above table and then adding a trend line. In this case we used Microsoft Excel.

Demand curve is restricted to first quadrant in Cartesian coordinate system because both price and quantity demanded are always non-negative numbers. Unlike demand schedule, a demand curve is continuous. Therefore it gives us an idea of how much quantity will be demanded at any price in between the whole dollar amounts.

by Irfanullah Jan, ACCA and last modified on Mar 21, 2019