Demand is the quantity of a good, asset or other type of value that market participants are willing to buy at a price level in a given time period.
Demand CurveDemand is modeled as a curve that shows the quantity demanded by a market for a range of prices.
The law of demand is a principle of economics that states that demand decreases as price increases and demand increases when price declines. In other words, all else being equal, price and demand have an inverse relationship. The law of demand means that demand curves always point down going from left to right.The demand curve is typically modeled together with a supply curve that gives the quantity that market participants are willing to supply at each price level. Points where supply and demand curves intersect are known as market equilibrium.In an efficient market, prices and quantities are in equilibrium. As such, supply and demand curves can be used to model a wide range of economic conditions and theories.
ElasticityPrice elasticity of demand is the percentage change in demand in response to a one percent change in price. These are almost always negative such that it is common to omit the negative sign. An elasticity of less than 1 is said to be inelastic. An elasticity of greater than one is said to be elastic. Firms achieve optimal revenue at a price where elasticity is exactly one. Where elasticity is greater than one, price increases result in less revenue.
NotesThere are exceptions to the law of demand such as giffen goods that can experience more demand at a higher price.
This is the complete list of articles we have written about economics.
If you enjoyed this page, please consider bookmarking Simplicable.
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.