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DEMAND
THE LAW OF DEMAND
The law of demand states that the quantity demanded by consumers
falls as price rises (and vice versa)
The quantity demanded for a good at each price level can be shown
on a demand schedule.
Price (cents)
Qty Demanded
20
40
60
80
100
240
200
160
120
80
Price (cents)
Qty Demanded
20
40
60
80
100
240
200
160
120
80
By plotting the points onto a graph, a demand curve can be derived.
Price (c)
Qty
As price rises from 60c to 80c,
quantity demanded contracts
from
160 quantity
to 120. demanded
At 60c,
There is a movement
along
is 160
the demand curve!
Price
12 0
100
80
60
40
20
D
0
40
80
120
160
200
240
Quantity
Contraction and Expansion
A contraction in quantity demanded occurs when the price of a
good rises. This is shown as a movement along the curve.
An expansion in quantity demanded occurs when ……………
INCREASES and DECREASES in DEMAND
An increase or decrease in demand occurs for any factor other
than price.
• there is a shift of the curve
• an increase in demand sees a shift of the curve to the
right
• a decrease in demand sees a shift of the curve to the
left
Price (cents)
Qty Demanded
New Qt Demanded
20
40
60
80
100
240
200
160
120
80
280
240
200
160
120
Any factor other than price
will cause a shift of the
demand curve. At 60c,
demand will rise from 160 to
200 at the same price.
Price
12 0
100
80
60
40
D2
20
D1
0
40
80
120
160
200
240
Quantity