Demand in Microeconomics

Study Notes

Demand in Microeconomics

Demand: The amount of a good or service consumers are willing and able to purchase at different price points.

Law of Demand

The Law of Demand states that as prices increase, the quantity demanded decreases, all other things being equal.

Ceteris Paribus

Ceteris paribus is a Latin phrase meaning "all other things being equal." It's a crucial assumption in economics allowing us to isolate the relationship between two variables (price and quantity demanded).

Demand Schedule Example

Shows how quantity demanded changes with different prices, maintaining other factors constant.
- Price: 23, Quantity Demanded: 70
- Price: 5, Quantity Demanded: 55
- Price: 7, Quantity Demanded: 45
- Price: 9, Quantity Demanded: 35
- Price: 14, Quantity Demanded: 10

Demand Function

The demand function expresses the relationship between quantity demanded (Qd) and price (P).
- Formula: Qd = a - bP
  - a and b are constants; b is typically negative.

Calculating Quantity Demanded

Given the demand function ( Qd = 80 - 5P ), if ( P = 2 ), the quantity demanded is 70.

Calculating Price

Given the demand function ( Qd = 80 - 5P ), if ( Qd = 35 ), the price is 9.

Demand Curve

The demand curve graphically illustrates the relationship between price and quantity demanded. The curve slopes downward, reflecting the inverse relationship.

Price and Quantity Demanded Relationship

The demand curve shows that as price increases, quantity demanded declines, and vice versa.

Exceptions to the Law of Demand

Some goods, like necessities (like insulin), see demand less affected by price changes--their consumption is relatively stable across different price ranges.

Description

Explore the fundamentals of demand in microeconomics through this engaging quiz. Understand key concepts such as the Law of Demand, ceteris paribus, and demand schedules. Test your knowledge on how price changes affect quantity demanded.