Introducing Supply and Demand

Market demand is the summation of the individual quantities that consumers are willing to purchase at a given price.

The demand schedule represents the amount of some good that a buyer is willing and able to purchase at various prices. The relationship between price and quantity demanded reflected in this schedule assumes the following factors remain constant:

• Income levels;
• Population;Tastes and preferences;
• Price of substitute goods; and
• Price of complementary goods

The demand schedule is depicted graphically as the demand curve. The demand curve is shaped by the law of demand. In general, this means that the demand curve is downward-sloping, which means that as the price of a good decreases, consumers will buy more of that good.

A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at every different price. A market demand schedule for a product indicates that there is an inverse relationship between price and quantity demanded. The graphical representation of a market demand schedule is called the market demand curve.

The determinants of demand are:

• Income
• Tastes and preferences
• Prices of related (AKA complimentary) goods and services
• Prices of substitutes
• Number of potential consumers

The market demand is the summation of the individual quantities that consumers are willing to purchase at a given price.

As noted, both individual demand curves and market demand are typically expressed as downward shaping curves. However, special cases exist where the preference for the good or service may be perverse. Two different hypothetical types of goods with upward-sloping demand curves are Giffen goods (an inferior but staple good) and Veblen goods (goods characterized as being more desirable the higher the price; luxury or status items).