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Demand Curve

One of the fundamental concepts in economics is demand. When customers desire a

thing and are prepared to pay for it, we say there is a demand for that particular product.
Before a manufacturer can sell a product, there must be a demand for it. Even though we are
all part of the demand still, The Demand encompasses not just the desire for a product or
service: it will be based on the willingness and capacity to purchase it at the price charged.
The demand of a product depends on the price; according to the law of demand states that
there is an inverse and negative relationship between price and quantity demanded. An
inverse relationship happens when the price increases, the demand decreases, and the demand
increases only if the price decreases. The negative relationship is when the quantity
demanded falls as the price grows. Case and Fair (2002) found that when Price decreases,
Quality demand rises.

The law of demand can be represented through a demand curve, demand curve is a
graphical representation of how much of a certain thing or goods a household might afford at
various prices. It will be constructed through the demand schedule since it is a tabular form
where it shows the Household’s capacity and desire to buy products and services at a specific
time and for a specific price. So, both show the relationship of price and quality demanded.
We always encounter the law of demand because we tend to buy more items when the price
is cheaper than expensive and then, the item becomes more valuable.

Moreover, the curve will show the relationship between the two and downward
sloping due to two significant causes namely: the income effect and substitution effect. As a
result of a fall in the price of community, the income effect enhances the consumer's
purchasing power (Vivar, et al 2001). On the other side, the substitution effect is generated by
a change in the consumer's taste and preference as a result of a price rise. Furthermore, when
things grow more expensive, buyers are more likely to seek out lower-cost alternatives.

DEMAND CURVE: The Graphical Presentation

 The movement means the change of the quantity demanded of the item resulting from
the change of price. The upward movement represents the contraction of demand that is
fallen demand due to price rise, while the downward indicates an expansion of demand that
there is an increasing demand due to fall of prices. For instance, if the price of the grape jam
changes from 200 pesos to 300 pesos then, it will affect the quantity demanded and will cause
upward movement while, if 200 pesos decreases to 100 then, the change will lead to
downward movement.

A. Price factor

P The movement and shift of

the demand curve is due to
price and non-price factor.

D
Qd

B. 1.Non- price Factor-shift to the right

Population
This demand curve shifts to the
right due to more people living in
the area, thus Quality demanded
(Qd) on goods increases.

The shift in Demand Curve is a change due to the non-price factor, i.e., the income of
the consumers, changes in taste and preference of the consumers, related goods, wealth, etc.
there are two types of a shift in the demand curve: leftward and rightward. When it shifts to
rightward means that there is a rise in the demand for the item, as the figure is shown above,
more people are living in the area so, the quality demand on goods increases also.

B.2 Non-price factor, shifts to the left

Occasion
There is no occasion, say fiesta in
the city. Hence Qd on lechon
decreases resulting to the shift of the
demand curve to the left.
D1
D2

Qd

The demand curve shifts to the left, which indicates that there is a decrease in the
demand due to the other factor than price; Let say there is a fiesta in the city and the Qd on
Lechon decreases why? Because of the occasion (non-price determinant) that is other than
the price.
Example:

Demand Schedule:

Table 1. Hypothetical data of Jan Mikhael’s demand schedule on cakes

Pt P Qd
A 0 180
B 10 150
C 20 120
D 30 90
E 40 60
F 50 30

Fig 1. Demand curve for Jan Mikhael’s Candies

According to the convention, the demand curve is drawn with the price on the vertical
axis and quantity on the horizontal axis. A negative relationship between Qd and P is illustrated
in this example because at point B, the price is 10 and the Qd is 150, but at point C, the price is
10 and, the Qd is 120. As the price of candies goes up, the demand for the cake goes down,
which explains the negative relationship between the price and quality demand. Since the
demand is influenced only by the price then it is, there is no shift or change in the demand curve
and the change is just a movement along the curve. This means that people will buy more of the
product, as its price falls.
 In addition, Income (non-price determinant) shift depends on the type of product namely:
normal goods and inferior goods. Inferior goods are goods for which demand tends to fall when
income rises, while normal goods are goods for which demand goes up when income is higher
and for which demand goes down when income is lower. The Inferior goods differ from normal
goods in their behavior. The desire for inferior commodities, which are linked with the lowest
strata of the socio-economic groupings, diminishes as the group's income rises. Cheap autos or
public transportation are some instances of inferior goods. As society's income rises, people will
want to upgrade to better-branded automobiles, and so demand for inexpensive cars would
decline over time. We can observe the demand curve for an inferior good to determine the effect
of additional wealth on its price. Also, when income increases, the demand for inferior goods
shifts to the left, and the demand for normal goods shifts to the right.

In conclusion, people will buy more of a product at a lower price than at a higher price, if
nothing changes because, at a lower price, more people can afford to buy more goods and more
of an item and more frequently, than they can at a higher price. Other than that, at lower prices,
people tend to buy some goods as a substitute for others more expensive. This is what we
encounter in every day “law of demand” as a human individual and at average state in the
society. In economics, when the price goes down, the demand stays the same; the prices cause
the quantity demanded to change, the only thing that changes quantity demanded is the change in
price, and the only thing that changes demand is one of the non –price determinants. When the
demand curve in the graph is downward or upward, it means there is a movement along the curve
between the price and demand while, if the demand curve leads rightward and leftward, there is a
shift in the position of the curve caused by the non-price determinants, i.e., the income of the
consumers, changes in taste and preference of the consumers, related goods, wealth and, etc. and
results in a new demand curve.