Types of Market Economy Understanding Demand Macroeconomic Policy and Demand

The Law of Demand
The law of demand states that when prices rise, demand will fall. When prices fall, demand will rise.
The law of demand is simply an expression of the inverse relationship between price and demand. It involves price only. None of the other drivers of demand mentioned above are involved. If they do come into play, the functioning of the law can be affected. Demand can be seen to change for reasons other than price.
Demand Curve
A demand curve is a graph that displays the change in demand resulting from a change in price. It's a visual representation of the law of demand.
The demand curve can be a useful tool for businesses because it can show them the prices at which consumers start buying less or more. It can point out prices at which a company can maintain consumer demand and support reasonable profits.
On the demand curve graph, the vertical axis denotes the price, while the horizontal axis denotes the quantity demanded. A demand schedule, or table created by a business that lists the quantity of a product that consumers will buy at particular price points, can provide the figures for the demand curve chart.
Once plotted, the demand curve slopes downward, from left to right. As prices increase, consumers demand less of a good or service.
A supply curve slopes upward. As prices increase, suppliers provide more of a good or service.


Market Equilibrium
The point where supply and demand curves intersect represents the market clearing or market equilibrium price. An increase in demand shifts the demand curve to the right. The two curves then intersect at a higher price, which means consumers are willing to pay more for the product.
Equilibrium prices typically change for most goods and services because factors affecting supply and demand are always changing. Free, competitive markets tend to push prices toward market equilibrium.
Market Demand vs. Aggregate Demand
The market for each good in an economy faces a different set of circumstances, which vary in type and degree. In macroeconomics, we also look at aggregate demand in an economy.
Aggregate demand refers to the total demand by all consumers for all goods and services in an economy across all the markets for individual goods. Since aggregate demand includes all goods in an economy, it is not sensitive to competition or the substitution of goods. Nor is it to changes in consumer preferences between various goods. Demand in individual goods markets can be affected by these factors.