Explanation:
Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants—a consumer may be able to differentiate between a need and a want, but from an economist’s perspective they are the same thing. Demand is also based on ability to pay. If you cannot pay, you have no effective demand.
What a buyer pays for a unit of the specific good or service is called price. The total number of units purchased at that price is called the quantity demanded. An increase in the price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a decrease in price will increase the quantity demanded.
When the price of a gallon of gasoline goes up, for example, people look for ways to reduce their consumption by combining several errands, commuting by carpool or mass transit, or taking weekend or vacation trips closer to home. Economists call this inverse relationship between price and quantity demanded the law of demand. The law of demand assumes that all other variables that affect demand are held constant.
Demand schedule and demand curve
A demand schedule is a table that shows the quantity demanded at each price.
A demand curve is a graph that shows the quantity demanded at each price. Sometimes the demand curve is also called a demand schedule because it is a graphical representation of the demand scheduls.
Here's an example of a demand schedule from the market for gasoline.
Price (per gallon)Quantity demanded (millions of gallons)
\$1.00$1.00dollar sign, 1, point, 00800800800
\$1.20$1.20dollar sign, 1, point, 20700700700
\$1.40$1.40dollar sign, 1, point, 40600600600
\$1.60$1.60dollar sign, 1, point, 60550550550
\$1.80$1.80dollar sign, 1, point, 80500500500
\$2.00$2.00dollar sign, 2, point, 00460460460
\$2.20$2.20dollar sign, 2, point, 20420420420
Price, in this case, is measured in dollars per gallon of gasoline. The quantity demanded is measured in millions of gallons over some time period—for example, per day or per year—and over some geographic area—like a state or a country.
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