Demand Curve

The demand curve in economics is a graphical representation of the relationship between the quantity of a good that consumers are willing to buy and its price. This relationship can be expressed through the following function:

q = f ( p )

A rational economic agent typically reacts to an increase in the price of a good by reducing the quantity they demand. Therefore, assuming rational behavior, there exists an inverse relationship between the quantity demanded and the good’s price. Different combinations of price and quantity can be plotted on a Cartesian graph, with price on the vertical axis and quantity demanded on the horizontal axis. By plotting these price/quantity pairs as coordinates (x, y), the demand curve is formed.

In the first example (a), we illustrate a simple linear demand function. In contrast, example (b) shows a nonlinear demand function, represented as a hyperbola. In both cases, the demand curve has a downward slope. When drawing the demand curve, all other economic variables (such as income, prices of other goods, etc.) that could influence demand are assumed to be constant.

Here’s a practical example. In the diagram above, we have drawn the demand curve for a particular good (like a DVD, stadium ticket, etc.). When the price of the good is 10 euros, the consumer decides to purchase 4 units. The coordinates (price, quantity) mark point E1 on the graph. Now, let’s suppose the price decreases from 10 euros to 3 euros. With the lower price, the consumer chooses to buy 9 units. The new coordinates identify point E2 on the graph. Connecting points E1 and E2 gives us the consumer’s demand curve, illustrating their purchasing decisions.