ECO 181 02/11

Quantity and Law of Demand

• Concept of Quantity Demanded

  • When price is $6, quantity demanded is 0.

  • Example with pricing - as price decreases, quantity demanded typically increases.

• Law of Demand

  • Definition:

  • The law of demand states there is a negative or inverse relationship between the price of a commodity and the quantity demanded.

    • As price decreases, demand often increases, and vice versa.

  • Application of Law:

  • When analyzing demand, one must keep everything else constant, also known as ceteris paribus.

  • Example:

  • If the price of a commodity decreases from $5 to $3, one can expect an increase in quantity demanded, provided all other factors remain unchanged.

Factors Affecting Demand

• Constant Price Scenario

  • In this context, if the price of coffee remains unchanged while demand factors change, it is essential to understand the effect of those factors on consumption habits.