demand curve

(noun)

The graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.

Related Terms

Examples of demand curve in the following topics:

  • The Demand Curve

    • This is referred to as the demand curve.
    • The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together.
    • The constant "b" is the slope of the demand curve and shows how the price of the good affects the quantity demanded.
    • The graph of the demand curve uses the inverse demand function in which price is expressed as a function of quantity.
    • The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve.

  • Marginal Analysis

    • Specifically, firms tend to accomplish their objective of profit maximization by increasing their production until marginal revenue equals marginal cost, and then charging a price which is determined by the demand curve.
    • If the industry is perfectly competitive (as is assumed in the diagram), the firm faces a demand curve (D) that is identical to its marginal revenue curve (MR).
    • Thus, this is a horizontal line at a price determined by industry supply and demand.
    • For example, the marginal revenue curve would have a negative gradient, due to the overall market demand curve.
    • This series of cost curves shows the implementation of profit maximization using marginal analysis.

  • The Influence of Supply and Demand on Price

    • Supply and demand is an economic model of price determination in a market.
    • Since determinants of supply and demand other than the price of the good in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves).
    • By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves .
    • Since the demand curve slopes down and the supply curve slopes up, when they are put on the same graph, they eventually cross one another.
    • Apply the basic laws of supply and demand to different economic  scenarios

  • Profit-Maximization Pricing

    • In the accompanying diagram, the linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market and thus cannot set its own selling price.
    • This output level is also the one at which the total profit curve is at its maximum.
    • If, contrary to what is assumed in the graph, the firm is not a perfect competitor in the output market, the price to sell the product at can be read off the demand curve at the firm's optimal quantity of output.
    • This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.

  • Profit

    • In , the linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.
    • This output level is also the one at which the total profit curve is at its maximum.
    • If, contrary to what is assumed in the graph, the firm is not a perfect competitor in the output market, the price to sell the product at can be read off the demand curve at the firm's optimal quantity of output.
    • This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.

  • Demand-Based Pricing

    • Demand-based pricing is any pricing method that uses consumer demand - based on perceived value - as the central element.
    • Demand-based pricing, also known as customer-based pricing, is any pricing method that uses consumer demand - based on perceived value - as the central element.
    • The theory is this drives demand greater than would be expected if consumers were perfectly rational.
    • Price skimming is sometimes referred to as riding down the demand curve.
    • Demonstrate the meaning of and the different types of demand-based pricing

  • Transfer Pricing

    • In the diagram that follows , this intersection is represented by point A, which will yield a price of P*, given the demand at point B.
    • The demand curve remains the same.
    • It can be shown algebraically that the intersection of the firm's marginal cost curve and marginal revenue curve (point A) must occur at the same quantity as the intersection of the production division's marginal cost curve with the net marginal revenue from production (point C).

  • Markup Pricing

    • Information on demand and costs is not easily available; however, this information is necessary to generate accurate estimates of marginal costs and revenues.
    • Firms are never too sure about the shape of their demand curve; neither are they very sure about the probable response to any price change.

  • Business Analysis

    • The first step in the business analysis process is to examine the projected demand for the product.
    • Operating costs that account for possible economies of scale and learning curves

  • Maturity

    • Demand for the product ultimately decreases due to competition and market saturation, as well as new technologies and changes in consumer tastes.
    • Costs are lowered as a result of production volumes increasing and experience curve effects