Question

Define: a. demand b. quantity demanded c. market d. demand schedule e. demand curve f . law of demand

Short answer

a. Demand is consumers' desire to acquire and pay for goods/services. b. Quantity demanded is the amount of a good/service consumers are willing and able to buy at a particular price. c. A market is where buyers and sellers transact. d. A demand schedule is a table showing the quantity of a good/service that consumers are willing to buy at various prices. e. A demand curve is a graph depicting the relationship of price and quantity demanded. f. Law of demand states that as price increases, demand decreases, and vice versa.

Step-by-step solution

Definition of Demand

Demand, in the realm of economics, is referred to as the consumer's desire to acquire goods or services and his/her willingness and ability to pay a certain price within a specific time period.

Definition of Quantity Demanded

Quantity demanded is a term in economics that refers to the total amount of a good or service that consumers are willing and able to purchase at a particular price within a given time frame.

Definition of Market

A market in economic terms is a place where buyers and sellers meet and transact with each other. It can be a physical location or a virtual platform, where goods, services or resources are exchanged.

Definition of Demand Schedule

A demand schedule in economics is a tabular representation that displays the quantity of a particular good or service that consumers are willing to purchase at various levels of price, during a specific time period.

Definition of Demand Curve

A demand curve in economics is a graphical representation of the demand schedule. It plots the relationship between the price of a good or service and the quantity demanded. The demand curve generally slopes downwards from left to right, indicating the inverse relationship between price and quantity demanded.

Law of Demand

The law of demand (in economics) states that, other factors being equal, the quantity of a good or service demanded by consumers decreases as its price increases, and vice versa. This is typically represented by a downward-sloping demand curve.

Key concepts

Demand

In economic discussions, the term demand embodies more than just a wish for something; it is a compound notion that involves desire, means, and decision-making. When we talk about demand, we focus on the products or services that consumers are both willing and able to purchase at different price points. Demand is central to the very functioning of markets and it is not static; it can change with fluctuations in prices, incomes, tastes, and preferences.

For instance, when smartphone prices drop, more individuals may choose to buy them, not merely because they want them, but also because they can afford them. The larger concept of demand is key to understanding consumer behavior and is foundational to much of economic theory.

Quantity Demanded

While quantity demanded might seem similar to demand, it actually refers to a specific amount of goods or services that consumers are ready to purchase at a given price. It is a precise number, not a broad concept, and changes in response to price alterations for the good or service in question.

An easy way to think about quantity demanded is to picture yourself in a candy store. If the price per chocolate bar is set lower than usual, you might decide to buy five bars instead of your usual two. Here, the quantity demanded has changed from two to five, based solely on a change in the good’s price. This important distinction helps us isolate the effects of price on consumer purchasing choices.

Market

A market in the economic sense is essentially a stage where the drama of buying and selling happens. It is the meeting ground for those who want to sell goods or services and those who are looking for those same goods or services. Markets can be physical locations like grocery stores or stock exchanges, but in our modern world, they can also be digital platforms like e-commerce sites.

Markets facilitate trade and are the pillars of economic activity. They come in various forms and sizes, from local farmers' markets to global commodity exchanges, and each serves as a barometer for supply and demand forces in play, affecting prices and availability of goods and services for consumers.

Demand Schedule

A demand schedule is a beneficial tool for visualizing how the quantity demanded of a good might change at different price points. It is a table that summarizes the possible prices for an item against the corresponding quantities that consumers are likely to purchase. This schedule is hypothetical—it assumes everything else remains constant, a ceteris paribus condition.

Let's use ice cream as an example: A demand schedule could show that at \(5 per scoop, you’d buy two scoops per week, but if the price lowers to \)3, you’d indulge in three scoops. Demand schedules are used to illustrate how sensitive consumers are to price changes, which is also referred to as price elasticity of demand.

Demand Curve

The demand curve brings the demand schedule to life by graphing it. The curve typically has a downward slope, visually representing the inverse relationship between the price of an item and the quantity of the item consumers are willing to buy. On the graph, the vertical axis usually shows price, while the horizontal axis reflects quantity.

When plotted, it becomes clear that as the price of a good rises, the quantity demanded generally falls, and conversely, as the price drops, the quantity demanded tends to increase. The demand curve is a vital tool in economics for analyzing consumer behavior and market dynamics, as well as for predicting how changes in prices can impact demand levels.