Cambridge International as and a level Economics Ebook

Demand curve: 
represents the relationship between the 
quantity demanded and price of a product.
Market demand: 
the total amount demanded by 
consumers.
Demand schedule: 
the data from which a demand curve 
is drawn.
KEY TERMS
Price of a ‘standard’ 
PC (US$)
Quantity demanded per 
week – demand curve 
D
0
2,000
1,000
1,800
2,000
1,600
3,000
1,400
4,000
1,200
5,000
1,000
6,000
800
7,000
Table 2.1
 
Market demand schedule for PCs
1600
1200
800
3000
5000
7000
Quantity demanded
Price (US$)
D
0
Figure 2.1 
The market demand curve for PCs
40
Cambridge International AS Level Economics

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Th
e market demand curve in 
Figure 2.1
 shows:
■ 
An inverse or negative relationship between price and 
quantity demanded. In other words:
❏
when price goes up, there is a 
decrease
in 
quantity 
demanded
❏
when price goes down, there is an 
increase
in 
quantity 
demanded
.
Changes in price cause a 
change
 
in quantity demanded
and we show this by movements up and down the demand 
curve.
■ 
A linear relationship – this demand curve has been drawn 
as a straight line. However, it is perfectly acceptable for 
price and quantity demanded to be related in a non-linear 
manner in the form of a type of curve.
■ 
A continuous relationship – we could look at the diagram 
and find out at what price consumers would be willing and 
able to buy 1,259 PCs.
■ 
A time-based relationship – the time period here is weekly.
■ 
Other things being equal, 
ceteris paribus.
Figure 2.1
 allows us to see the complex relationship of 
demand. It allows us to estimate how much consumers 
may spend when buying PCs or, conversely, how much 
revenue companies may receive from selling PCs. If the 
price of each PC is $1,800 and the information provided 
is accurate, then consumers will buy 2,000 units and their 
total spending will be equal to $3,600,000 – the revenue 
that companies receive from selling this quantity of the 
product.