CHAPTER 3 DEMAND, SUPPLY, AND MARKET EQUILIBRIUM DEMAND •A demand curveshows the quantities demanded (of a good/ service) at different prices. To derive demand curve, we hold everything that affect demand constant, except for its price. The figure illustrates the demand curve resulting from the demand schedule: Price (dollars) Quantity demanded 1 5 2 4 3 3 4 2 5 1 Thelaw of demand states that other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; and the lower the price of a good, the greater the quantity demanded. A Change in the Quantity Demanded Versus a Change in Demand •A change in price results in a movement along the demand curve, which is change in the quantity demanded. •A change in the factors other than the price of the good shiftsthe demand curve, which isa change in demand. An increase in demand shifts the demand curve rightward and a decrease in demand shifts the demand curve leftward. •In the figure, the movement along demand curve D0from point ato point bas a result of the price rising from $2 to $4 is a change in the quantity demanded. The shift of the demand curve from D0to the new demand curve D1is a change in demand.
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