Introduction
Have you ever noticed how people buy more ice cream when it’s on sale but less when the price goes up? This everyday observation is actually an important economic principle called the Law of Demand. But to fully understand it, we need to learn two key terms: demand and quantity demanded. At first, these might sound similar, but they have different meanings in economics. Let’s break them down in a simple way!
What is Demand?
Demand refers to the overall desire and ability of consumers to buy a product at different prices. It’s not just about how much people want something—it’s also about whether they can afford it.
For example, imagine a new video game is released. The demand for the game includes all possible quantities that people are willing to buy at different prices. If the price is high, fewer people will buy it. If the price drops, more people will purchase it.
Demand is represented by the entire demand curve (a line on a graph showing different price-quantity combinations).
What is Quantity Demanded?
Quantity demanded is a specific number—it tells us exactly how much of a product people will buy at one particular price.
Using the same video game example:
- If the game costs $60, maybe 1,000 people will buy it. Here, the quantity demanded is 1,000.
- If the price drops to $30, maybe 3,000 people will buy it. Now, the quantity demanded is 3,000.
Quantity demanded is a single point on the demand curve.
The Law of Demand
The Law of Demand states that:
“When the price of a good or service goes up, the quantity demanded goes down, and when the price goes down, the quantity demanded goes up (assuming all other factors stay the same).”
This makes sense because:
- Budget Effect – People have limited money. If something becomes cheaper, they can afford more of it.
- Substitution Effect – If the price of pizza rises, people might buy burgers instead.
Example:
| Price of Ice Cream | Quantity Demanded (per week) |
|---|---|
| $5 | 50 cones |
| $3 | 100 cones |
| $1 | 200 cones |
As the price falls, the quantity demanded increases.
Why the Difference Matters
- A change in price moves us along the demand curve (changing quantity demanded).
- A change in demand (shifting the whole curve) happens when something other than price affects buying habits, like:
- A rise in consumer income
- A popular celebrity endorsing the product
- A change in the price of substitute goods
- A change in people’s tastes
Example of Shift in Demand:
If a health report says ice cream is good for you, more people might buy it at every price, shifting the entire demand curve to the right.
Conclusion
Understanding the difference between demand (the whole curve) and quantity demanded (a single point) helps us see how prices influence our choices. The Law of Demand explains why sales attract more buyers and why expensive products sell less. Next time you see a “50% off” sign, you’ll know it’s the Law of Demand in action!
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