What Is the Demand Curve?

What is a Demand Curve?

The demand curve is a line graph utilized in economics, that shows how many units of a good or service will be purchased at various prices. The price is plotted on the vertical (Y) axis while the quantity is plotted on the horizontal (X) axis.
Demand curves are used to determine the relationship between price and quantity, and follow the law of demand, which states that the quantity demanded will decrease as the price increases. In addition, demand curves are commonly combined with supply curves to determine the equilibrium price and equilibrium quantity of the market.

Drawing a Demand Curve

The demand curve is based on the demand schedule. The demand schedule shows exactly how many units of a good or service will be purchased at various price points.
For example, below is the demand schedule for high-quality organic bread:

It is important to note that as the price decreases, the quantity demanded increases. The relationship follows the law of demand. Intuitively, if the price for a good or service is lower, there is a higher demand for it.
From the demand schedule above, the graph can be created:

Through the demand curve, the relationship between price and quantity demanded is clearly illustrated. As the price for notebooks decreases, the demand for notebooks increases.

Shifts in the Curve

Shifts in the demand curve are strictly affected by consumer interest. Several factors can lead to a shift in the curve, for example:

1. Changes in income levels

If the good is a normal good, higher income levels lead to an outward shift of the demand curve while lower income levels lead to an inward shift. When income is increased, the demand for normal goods or services will increase.

2. Changes in the market’s size

A growing market results in an outward shift of the demand curve while a shrinking market results in an inward shift. A larger market size results from more consumers. Therefore, the demand (due to more consumers) will increase.