Demand Curve Analysis and Shifters

The Law of Demand and Demand Curve Analysis

The Law of Demand

• The law of demand describes an inverse relationship between price and quantity demanded.

  • When the price of an item goes up, the quantity consumers purchase goes down.

  • When the price of an item goes down, the quantity consumers purchase goes up.

• Reasoning: This relationship is primarily due to a change in purchasing power.

  • If the price of an item increases, a consumer's purchasing power (the amount of goods and services they can buy with a fixed income) decreases, leading them to buy less of that item.

  • If the price decreases, purchasing power increases, making the item