Lesson preview · Demand
The Demand Curve
~7 min · Free to read
The law of demand is a sentence. The demand curve is its graph: a visual map of how many units buyers want at every possible price. Once you can plot it, read it, and aggregate it across many buyers, you have the workhorse tool of price theory.
Key Term
Demand Schedule
A table listing the quantity buyers would purchase at each price. Each row is one (price, quantity) pair.
Key Term
Demand Curve
A graph showing the relationship between price and quantity demanded. Price on the vertical (y) axis, quantity on the horizontal (x) axis. Each point on the curve corresponds to one row of the schedule.
Tip
Axis convention (memorize this)
P on the vertical axis, Q on the horizontal axis. This is Alfred Marshall’s convention from the 1890s — slightly weird (we normally put the ‘cause’ on x), but universal in economics. Always plot it this way.
Reading off a curve. Given a price, find quantity: start at the price on the y-axis, move right until you hit the curve, drop straight down to the x-axis. Given a quantity, work the reverse. When demand is given as an equation like , just plug in numbers and solve — no eyeballing required.
From individual to market. Each buyer has their own demand curve. The market demand curve is what economists actually care about, and it’s the horizontal sum of all individuals: at each price, add up how many units every buyer wants. That’s one point on the market curve. Repeat for every price.
Key Term
Market Demand
The total quantity demanded by all buyers at each price. Found by summing every individual’s quantity at that price (horizontal summation along the x-axis).
Tip
Why HORIZONTAL summation?
Everyone in a market pays the same price. So we fix a price and add the quantities (which live on the horizontal axis). We never add prices.
Check yourself · no marks
At 4 dollars per latte, Alex would buy 3, Beth would buy 5, and Chris would buy 2. If they’re the only buyers, what is market quantity demanded at 4 dollars?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Worked Example
The demand for Uber rides in a city is , where P is dollars per ride and Q is rides per hour.
- How many rides at P = 20 dollars?
- How many at P = 35 dollars?
- At what price does quantity demanded hit zero (the ‘choke price’)?
Practice · 1 / 5
On a standard demand curve, which variable goes on the vertical axis?
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