Demand curve

In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at any given price. It is a graphic representation of a market demand schedule. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together, assuming independent decision-making.

Demand curves are used to estimate behaviors in competitive markets, and are often combined with supply curves to estimate the equilibrium price (the price at which sellers together are willing to sell the same amount as buyers together are willing to buy, also known as market clearing price) and the equilibrium quantity (the amount of that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market. In a monopolistic market, the demand curve facing the monopolist is simply the market demand curve.

Demand curves are usually considered as theoretical structures that are expected to exist in the real world, but real world measurements of actual demand curves are difficult and rare.

According to convention, the demand curve is drawn with price on the vertical (y) axis and quantity on the horizontal (x) axis. The function actually plotted is the inverse demand function.

The demand curve usually slopes downwards from left to right; that is, it has a negative association (for two theoretical exceptions, see Veblen good and Giffen good). The negative slope is often referred to as the "law of demand", which means people will buy more of a service, product, or resource as its price falls. The demand curve is related to the marginal utility curve, since the price one is willing to pay depends on the utility. However, the demand directly depends on the income of an individual while the utility does not. Thus it may change indirectly due to change in demand for other commodities.

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