Demand Curve

Definition

The demand curve is a graphical representation showing the quantity of a good or service that consumers are willing to purchase at different price levels. Typically, the demand curve slopes downward to the right, indicating that the lower the price, the more consumers are willing to buy.

Origin

The concept of the demand curve originated in the late 19th century economic studies, particularly systematized by Alfred Marshall in his 1890 book, 'Principles of Economics'. Marshall's graphical representation of the demand curve helped people understand the relationship between price and quantity demanded more intuitively.

Categories and Features

The demand curve can be categorized into individual demand curves and market demand curves. An individual demand curve represents the demand of a single consumer, while a market demand curve is the aggregate demand of all consumers. The slope and shape of the demand curve can be influenced by various factors such as consumer preferences, income levels, and the availability of substitutes.

Case Studies

In 2007, when Apple launched the iPhone, the initial high price limited demand. However, as the price gradually decreased, demand significantly increased, illustrating the typical characteristics of a demand curve. Another example is Tesla's electric cars, where market demand rose significantly as production costs decreased and prices fell.

Common Issues

Investors often confuse shifts in the demand curve with movements along the curve. A shift in the demand curve indicates a change in demand, while movement along the curve is due to a change in price affecting the quantity demanded. Additionally, demand curves are not always linear and can become complex due to market conditions.