lnc3 - Notes 4. Demand and Supply Curves-the basics (Ch. 4)...

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Notes 4. Demand and Supply Curves--the basics (Ch. 4) Demand Demand is the willingness and ability of a buyer to purchase different quantities of a good at different prices during a given time period. This is why we often call demand curves willingness-to-pay curves. Let’s plot a simple linear demand curve. Remember that demand curves are downward sloping, as a rule, and hence illustrate the Law of Demand: P Q d , ceteris paribus. Let’s use the numbers in Table 1 below: We have two columns of numbers: Price (P) and Quantity Demanded (Qd) for peanuts for a hypothetical family for a year. Each pair of numbers in the table shows us the quantity demanded--the amount of peanuts the family will buy per year--when they are faced with paying each of the prices in the table. As the price falls, quantity demanded rises, in keeping with the law of demand. Let’s plot the points in Figure 1: Now, if we connect the dots with a straight line, we have a demand curve, in Figure 2.
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lnc3 - Notes 4. Demand and Supply Curves-the basics (Ch. 4)...

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