Lecture Notes: The Law of Demand

Introduction to the Law of Demand

• Core Idea: Fundamental concept in microeconomics.
• Intuitive Principle: Raising the price of a product lowers the quantity demanded.
  • Conversely, lowering the price increases the quantity demanded.
• Exceptions: Will be explored in future videos.

Key Concepts

• Demand vs. Quantity Demanded
  • Demand: Refers to the relationship between price and quantity demanded, holding all else constant (ceteris paribus).
  • Quantity Demanded: A specific amount of a product consumers are willing to buy at a given price.

Example: Scenario with an E-book

• Demand Schedule: A table showing the relationship between price and quantity demanded.
  • Scenario A: Price = $2, Quantity Demanded = 60,000 units
  • Scenario B: Price = $4, Quantity Demanded = 40,000 units
  • Scenario C: Price = $6, Quantity Demanded = 30,000 units
  • Scenario D: Price = $8, Quantity Demanded = 25,000 units
  • Scenario E: Price = $10, Quantity Demanded = 23,000 units

Demand Schedule vs. Demand Curve

• Demand Schedule: Tabular representation showing how quantity demanded varies with price.
• Demand Curve: Graphical representation; a continuous curve that connects various price points.
  • Axes: Price (vertical) vs. Quantity Demanded (horizontal)
  • Plotting Points: Each scenario is a point on the graph, showing price vs. quantity demanded.

Plotting Demand Curve

• Procedure:
  • Price is plotted on the vertical axis.
  • Quantity demanded is plotted on the horizontal axis.
  • Scenarios are plotted as points and connected to form the curve.
• Graph Details:
  • Price range: $2 to $10
  • Quantity range: 10,000 to 60,000 units

Understanding Changes in Demand

• Change in Quantity Demanded: Movement along the demand curve, due to price change only.
• Change in Demand: Shift of the entire curve due to changes in other factors (to be discussed in future lectures).

Conclusion

• Key Takeaway: When only price changes, quantity demanded changes while demand remains constant, represented by the same curve or schedule.
• Future Topics: Will address how other factors can shift demand itself.