Thursday, May 8, 2008

Demand vs. Quantity Demanded

INSERT DIAGRAM HERE.

It is extremely important to understand the difference between demand and quantity demanded.

Demand
• refers to the entire relationship between prices and the quantity of this product or service that people want at each of these prices.
• should be thought of as "the demand curve."

Quantity demanded
• refers to one particular point on the demand curve (not the entire curve).
• refers to how much of the product is demanded at one particular price.
• is the horizontal distance between the vertical axis and the demand curve.





An increase in demand versus an increase in quantity demanded

With an increase in demand:
• the demand curve shifts to the right.
• at every possible price, a greater quantity is demanded.

An increase in demand might be caused by:
• an increase in the number of consumers.
• an increase in consumers' income (for a normal good) or a decrease in consumers’ income (for an inferior good).
• an increase in the price of a substitute good.
• a decrease in the price of a complementary good.
• an increase in preference for the product (i.e., the product becomes more popular).
• expectations (e.g., that the price will be higher in the future).

With an increase in quantity demanded:
• the price of the product decreases.
• there has been a movement from one point on the demand curve to another point (further to the right) on the same demand curve.

An increase in quantity demanded is caused by:
• a decrease in the price of the product.


A demand curve illustrates how much the quantity demanded changes when the price changes.

A change in quantity demanded is represented as a movement along a demand curve.

In the diagram below, there is an increase in the quantity demanded from two to four when the price of a hamburger falls from $4 to $2. This is illustrated by the movement along the demand curve from point B to point D.

Figure 4. An illustration of an increase in quantity demanded. There is a movement along the demand curve, but the demand curve does not shift. In this graph, there is a change is the quantity demanded, but demand does not change.

10 comments:

  1. thank you proffesor but pls can change in price of the good in question cause a change in quantity demanded?

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    Replies
    1. yes it do affect quantity demanded rather both of them are interrelated t each other. In simpler words, follow the concept, "At higher price of good, quantity demanded will be low and vice-versa"

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  2. its brilliant knowledge!

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  3. thank you sir for such a great answer!!! it was really a great help.....

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  4. Excellent Sir....

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  5. Thanks for Explaining it clearly and to the point. I spent one hour listening to lectures at uni yesterday and they could not explain it. Pathetic!

    Thanks

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  6. THANK bro, you rock SIRRRRRRRRRR. Whithout you, I would have PASSED!
    Bra you the man! yo

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  7. that debt clock tho

    ReplyDelete