In marketing, the demand curve is a graphical representation of how many units of a good or service will be bought at various prices. The demand curve shows the relationship between price and quantity demanded. It is downward-sloping, indicating that as prices increase, quantity demanded decreases. The demand curve is a key tool in economics, used to understand how consumers make purchase decisions and how businesses set prices.
The demand curve can be used to predict what will happen to price and quantity demanded if there is a change in demand or supply. For example, if there is an increase in demand (shift right), then the equilibrium price will increase and the equilibrium quantity will increase. If there is a decrease in demand (shift left), then the equilibrium price will decrease and the equilibrium quantity will decrease.
The demand curve can also be used to show the effects of government policies on the economy. For example, a price ceiling is a government-imposed maximum price. If the price ceiling is below the equilibrium price, then there will be a shortage of the good or service. This is because the quantity demanded will be greater than the quantity supplied at the price ceiling. On the other hand, if the price floor is above the equilibrium price, then there will be a surplus of the good or service. This is because the quantity supplied will be greater than the quantity demanded at the price floor.