Chapter 2: The Demand Curve

(T) Demand curve

A line drawn on a graph which shows how much of a good will be bought at different prices.

(FD) Effective Demand

Effective demand shows how much would be bought at any given price. It does now mean how much people would like to buy if they had endless amount of money.

(FD) The demand Curve

The relationship between price and demand can be shown on a graph. Price is plotted on the vertical axis and the amount sold at each price is shown on the horizontal axis. If these points are joined up by a smooth line a demand curve is formed. A demand curve shows the quantity shows the quantity demanded at any given price.

(T) Inverse Relationship (between price and quantity demanded)

When price goes up the quantity demanded falls and when the price goes down the quantity demanded rises

(FD) Movement along the demand curve

When there is a price change there is movement along the demand curve. We move along the curve from point a to point b to identify the new level of demand.

(FD) Straight Line demand curves

it's common to show demand using a straight line demand curve. The reason is to simplify the drawing of demand curves and to make it easier to understand diagrams.

(T) Effective demand

the amount of a good people are willing to buy at given prices over a given time period backed by the ability to pay.