Law of demand
The law of demand states that when
prices of goods and services rises the quantity demanded falls because first
of all, it drives away all those good bargain hunters and cheap people if it
got into a price level expensive enough for them. Individuals who have just
enough cash to buy it would no longer intend to purchase the good when the price
increased due to worries that they might run out of cash before payday arrives.
A table representing the quantity intended
purchase a good at a certain
These are assumptions about the buyer's
sentiment towards the number of intended
purchases at different prices for instance,
he's got $10 and he intends to buy 10 sodas
and 2 chips with that money. At
$0.50 cents per soda he could get 10 sodas for $5 enough for his entire crew,
but if the price is more than the usual he would have to face a decision whether
to still buy 10 sodas using all his available money sacrificing the chips.
This is a graphic representation of buyer's sentiment towards a change in price.
It plots the degree of relationship between the price of the good and the number
of items demanded at that price level. This is like drawing how the demand schedule
looks like when converted to an image. Changes in the demand curve are caused
by events such as taxes which increases the price a little bit therefore decreasing
total demand. There are instances where the demand for an item changes at the
same price level this is caused mainly by the average income of the consumer
or the available disposable resource. This is called the shift in demand.