The demand curve is a graph depicting the relationship between price and the quantity of goods that consumers want and can buy. These curves are used to estimate behavior in competitive markets and are often combined with supply curves to estimate the equilibrium point (when supply and demand are the same).
Demand is the desire of consumers to buy goods at various prices within a certain period of time. In short, demand is the quantity of goods needed in a particular market at a certain price, a certain level of income, and a certain period of time.
The supply-demand curve is part of economics. Both curves are closely related to the demand for goods and services and transactions between buyers and sellers.
Definition of supply and demand
Supply is the quantity of all goods and services that consumers want to buy at a certain time and price. Demand can be influenced by several factors, namely:
- The price of the product itself.
- The price of a replacement item or replacement item.
- Complete or increase the price of the item.
- Consumer tastes.
- Future price forecast.
The request has its own laws, which read:
“If the price goes up, the quantity of goods demanded will go down, and if the price goes down, the quantity demanded will increase.”
Demand is the total amount of goods and services currently available in the market at various possible prices within a certain period of time.
The level of supply can be influenced by several factors, such as:
- The price of the product itself
- Production cost.
- skills increase.
- Future price forecast.
Just like demand, supply has its own laws. The following is the law of bidding:
“The higher the commodity price, the more quantity the seller will provide. Conversely, the lower the price of the commodity, the smaller the quantity of goods being offered. “
Factors affecting demand
- The price of the product itself. If the price of a commodity becomes cheaper and cheaper, the demand for that commodity will increase.
- Prices for other related goods. This will affect whether there are two projects that are interrelated, and the relationship between them can be in the form of substitution (substitution) and complementation (realization).
- Per capita income level. Can reflect purchasing power. The higher the income level, the stronger the purchasing power, so that the demand for goods will increase.
- Taste or habit. The level of demand depends on tastes or social lifestyle habits.
- Total population. The more people who taste or are accustomed to the demand for certain commodities, the greater the demand for these commodities.
- Future price forecast. If we predict that the price of an item will increase, it is best to buy the item immediately, thus encouraging people to buy more of the item now to save on future purchases.
- Income distribution. If income is uneven, the level of income per capita can draw wrong conclusions. If income is poorly distributed, it means that purchasing power is usually weak, and therefore the demand for goods is reduced.
- The producers’ efforts have increased sales. The persuasive power of the seller plays a big role in influencing society. Promotional efforts for buyers usually encourage people to buy more than usual.
The law of demand
The law of demand is basically a hypothesis, which is stated as follows:
“The relationship between the goods requested and the price of goods is inversely proportional to this relationship, that is, when the price rises or rises, the quantity of goods demanded will decrease, on the other hand, if the price goes down, the quantity of goods demanded will decrease. goods will increase. “
It can be said like this:
“A direct comparison between demand and price means that if demand goes up, the relative price will go up, and conversely, if demand falls, the relative price will go down.”
Factors that can change the demand curve
- Price factor
When the price of the good demanded becomes higher or lower, changes are made along the demand curve.
- The factor is not price
If the price of the desired commodity becomes higher or lower, the demand curve shifts to the right. Non-price factors cause a change in demand, the demand curve shifts to the left; if the prices of other commodities, buyer’s income, and various other non-price factors change, those changes will cause the demand curve to shift to the right. move to the right. Or leave.
Type of demand curve
The movement along the demand curve and the movement of the demand curve
The downward slope of the demand curve is the demand curve, which shows that the quantity demanded decreases as the price increases, and vice versa. This is in line with the law of demand. In this case, the correlation between price and demand is negative. This curve applies to ordinary goods. Higher prices encourage consumers to change products.
The demand curve is upward sloping
An upward sloping demand curve indicates that there is a positive correlation between price and quantity demanded. Lower prices make the item less popular, so the quantity demanded is reduced. Conversely, higher prices increase demand. Inferior goods and Veblen goods fall into this category.
Bending demand curve
The distorted demand curve model is the traditional oligopoly model, which assumes that competitors will match the price decline but not the increase in price. Therefore, the demand curve will increase, and each firm believes that the demand curve above a certain price (Pe) is more elastic than the demand curve below that price (Pe). The model is incomplete because it cannot determine the current price from the start.
The demand curve is a curve that describes the quantity demanded at the price of a product while keeping other factors constant. According to the law of demand, an increase in the price of a commodity will decrease the quantity demanded, and vice versa.
Therefore, the request curve has a downward slope. A change in price will cause the demand curve to shift. At the same time, the curve shift to the right or to the left is caused by factors other than the price of the commodity itself.
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