The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.
The demand curve is a visual representation of how many units of a good or service will be bought at each possible price. It plots the relationship between quantity and price that’s been calculated on the demand schedule. That’s a table that shows exactly how many units of a good or service will be purchased at various prices.
Understanding the Demand Curve
The demand curve will move downward from the left to the right, which expresses the law of demand — as the price of a given commodity increases, the quantity demanded decreases, all else being equal.
Note that this formulation implies that price is the independent variable, and quantity the dependent variable. In most disciplines, the independent variable appears on the horizontal or x-axis, but economics is an exception to this rule.
For example, if the price of corn rises, consumers will have an incentive to buy less corn and substitute it for other foods, so the total quantity of corn consumers demand will fall.
Demand curves generally have a negative gradient indicating the inverse relationship between quantity demanded and price.
There are at least three accepted explanations of why demand curves slope downwards:
- The law of diminishing marginal utility
- The income effect
- The substitution effect