ECO 108 Study Guide - Comprehensive Final Exam Guide - Demand Curve, Sales Tax, Economic Surplus
20 Nov 2018
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If the price of lettuce rises, people will buy less lettuce. If the price of haircuts rises, people will buy fewer haircuts. If speeding tickets get more expensive, there will be less speeding. When the price goes up, the quantity demanded goes down. The quantity demanded of a good is the amount that people want to consume in some specified time period. Because higher prices are associated with lower quantities, it follows that the demand curve slopes downward, from the upper left to the lower right. The demand curve represents a function that relates prices to quantities. The input is a price (such as per cup) and the output is a quantity (such as 50 cups per day) All demand curves slope down, but some slope down more steeply than others. A very flat demand curve indicates a great deal of price sensitivity. A very steep demand curve indicates a very small amount of price sensitivity.
