Demand Curve & Law of Demand

Unit I: Business Management and Managerial Economics

Definition:

Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices over a given period of time.
The desire of a commodity backed by ability and willingness to pay is demand.
Consider your are a consumer of Oreo Biscuits. You like to eat 1 oreo packet every week which cost ₹20. Consider the price of the oreo biscuit packet is reduced from ₹20 to ₹15. The next time you go to buy oreo biscuit, will you buy more packets of the biscuits or less packets of the biscuit?
The Law of Demand states that, all else being equal, when the price of a good decreases, the quantity demanded increases, and when the price increases, the quantity demanded decreases.
This is because consumers are more willing to buy a good when it is cheaper and less willing to buy it when it is more expensive.

Definition:

A demand curve is a graphical representation of the relationship between the price of a good and the quantity demanded, typically showing an inverse (negative) relationship.

Shape of the Demand Curve:

The demand curve generally slopes downward from left to right. This downward slope reflects the law of demand: as the price decreases, consumers buy more of the good.
The typical demand function is often of the form D = a – bP, where D is the quantity demanded, P is the price, and a and b are constants. The negative relationship between price and demand (as price increases, demand decreases) is captured by the negative sign before bP.

Shifts vs. Movement Along the Demand Curve:

Movement along the curve: This occurs when the price of the good changes, and the quantity demanded changes as a result. For example, if the price of a good decreases, there will be a movement down along the curve to a higher quantity demanded.
Shift of the demand curve: A shift happens when there is a change in factors other than price (like income or preferences), causing the entire curve to move to the left (decrease in demand) or to the right (increase in demand).