INTRODUCTION TO DEMAND

Demand and Quantity Demanded

Demand refers to the amount of goods or services consumers are willing and able to
purchase at various prices during a given period of time. It is based on needs and wants
and the consumers’ ability to pay. The “demand” for a good is simply how much of that
good consumers would buy at various prices. What a buyer pays for a unit of the specific
good or service is called price.

Quantity Demanded is the total number of units that consumers would purchase at a
specific price. A rise in price of a good or service almost always decreases the quantity
demanded of that good or service. Conversely, a fall in price will increase the quantity
demanded.

Demand is represented by entire demand curve; quantity demanded is represented by a

single point on the demand curve that correlates with one price and one quantity.

Basis For
Demand Quantity Demanded
Comparison

Meaning Demand is defined as the willingness Quantity Demanded represents exact

of buyer and his affordability to pay quantity (how much) of a good or
the price for the economic good or service is demanded by consumers at
service. a particular price.

What is it? It lists out quantities that would be It is the actual amount of goods
purchased at various prices. desired at a certain price.

Change Increase or decrease in demand Expansion or contraction in demand.

Reasons Factors other than price Price

Measurement of Shift in demand curve Movement along demand curve

change

Consequences of No change in demand. Change in quantity demanded.

change in actual
price

Source: https://keydifferences.com/difference-between-demand-and-quantity-demanded.html
Law of Demand

The law of demand states that, if all other factors remain equal (ceteris paribus-- Latin word
meaning “all other things being equal”), the higher the price of a good, the less people will
demand that good. In other words, the higher the price, the lower the quantity demanded.
Economists call this inverse relationship between price and quantity demanded the law of
demand. 

A demand curve shows the relationship between price and quantity demanded. A demand
schedule is a table that shows the quantity demanded at different prices in the market.

https://www.economicshelp.org/blog/glossary/example-of-plotting-demand-and-supply-curve-graph/

Demand is the relationship between a range of prices and the quantities demanded at those
prices, as illustrated by a demand curve or a demand schedule. Quantity demanded only
pertains to a certain point on the demand curve, or one quantity on the demand schedule. In
short, demand refers to the curve and quantity demanded refers to the (specific) point on the
curve.

Determinants of Demand

1. The income of the consumers

- Normal goods are goods that are demanded more as income increases.
- Luxury goods are goods where an increase in income causes a bigger
percentage increase in demand.
- Inferior goods are goods that are demanded less as income increases.
2. The price of related goods (complements or substitutes)
- Substitute goods are goods that may be used in place of other goods as these
satisfy the same basic want or need. In economics, products are often
substitutes if the demand for one product increases when the price of the
other goes up.
 - Complementary goods are goods consumed jointly with another good. Such a
good usually has more value when paired with its complement than when
used separately. Price of a complement and demand for the other good are
inversely related.
3. The tastes or preferences of the consumers - favorable change leads to an increase
in demand; unfavorable change leads to a decrease.
4. Consumers’ expectations
- Future price- consumers’ current demand will increase if they expect higher
future prices; their demand will decrease if they expect lower future prices.
- Future income- consumers’ current demand will increase if they expect
higher future income; their demand will decrease if they expect lower future
income.
5. Number of buyers - more buyers lead to an increase in demand; fewer buyers lead
to decrease.

Movement in the Demand Curve

The movement in demand curve occurs due to the change in the price of the commodity
whereas the shift in demand curve is because of the change in one or more factors other
than the price.

Movement along the demand curve depicts the change in both the factors i.e. the price and
quantity demanded, from one point to another. Other things remain unchanged when there
is a change in the quantity demanded due to the change in the price of the product or
service, results in the movement of the demand curve. The movement along the curve can
be in any of the two directions:

 Upward Movement: Indicates contraction of demand, in essence, a fall in demand is

observed due to price rise.
 Downward Movement: It shows expansion in demand, i.e. demand for the product
or service goes up because of the fall in prices.

Hence, more quantity of a good is demanded at low prices, while when the prices are high,
the demand tends to decrease.

Shift in the Demand Curve

A shift in the demand curve displays changes in demand at each possible price, owing to
change in one or more non-price determinants such as the price of related goods, income,
taste & preferences and expectations of the consumer. Whenever there is a shift in the
demand curve, there is a shift in the equilibrium point also. The demand curve shifts in any
of the two sides:

 Rightward Shift: It represents an increase in demand, due to the favourable change

in non-price variables, at the same price.
  Leftward Shift: This is an indicator of a decrease in demand when the price remains
constant but owing to unfavorable changes in determinants other than price.

BASIS FOR MOVEMENT IN DEMAND

SHIFT IN DEMAND CURVE
COMPARISON CURVE

Meaning Movement in the demand curve is
when the commodity experience
change in both the quantity
demanded and price, causing the
curve to move in a specific
direction.
The shift in the demand curve is
when, the price of the commodity
remains constant, but there is a
change in quantity demanded due to
some other factors, causing the
curve to shift to a particular side.

Curve

What is it? Change along the curve. Change in the position of the curve.

Determinant Price Non-price

Indicates Change in Quantity Demanded Change in Demand

Result Demand Curve will move upward Demand Curve will shift rightward
or downward. or leftward.

Source: https://keydifferences.com/difference-between-movement-and-shift-in-demand-curve.html#:~:text=Movement%20along%20the
%20demand%20curve,movement%20of%20the%20demand%20curve.
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Greenlaw S. and Shapiro D. (2018). Principles of Microeconomics. OpenStax Rice University.

Rittenberg L and Tregarthen T. (2009). Principles of Microeconomics. Flatworld Knowledge, Inc.
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