Why does the demand curve have a downward slope?


I understand the theories of supply and demand. I can’t figure out, however, why demand has a negative slope. If demand is lower when prices are higher and quantity is lower, then why is that the highest point in the demand curve? Likewise, if demand is highest when prices are low and quantity is high, why is that the lowest point on the demand curve?

In: Economics

Unless I’m misunderstanding your question, it’s just a function of how the axes on the chart are defined. The x-axis (quantity demanded) increases from left to right and the y-axis (price) increases as you move up. So if you plot the two cases you describe (low demand + high price and high demand + low price) you get a downward sloping line.

The demand curve isn’t a continuum; it’s a series of fixed points that happen to form a downward curve. The key thing to remember with both the supply and demand curves is that they represent the quantity of a given good or service that people will *be willing to* buy or produce *at a given price*.

If the price for an item is very high, many firms are willing to produce it, which creates a large supply, you end up with a surplus due to low demand. As firms compete with one another to move product, prices come down and sellers gradually exit the market, which eventually settles into equilibrium, where firms produce roughly the exact amount of that item as people are willing to purchase at that price.

Price is the left, y axis and higher price is upward.

Quantity demanded (q) is bottom, x axis and more demand is to the right.

At a high Price (p), quantity (q) is low, so the curve starts in the upper left of the graph.
As p is lowered, q demanded increases…so the curve drops and “slips’ right., thurs a downward slope.

It is an inverse relationship…high price = lower demand, lower price = higher demand.

Think of the points on the demand curve as an answer to this question: “How many units would be demanded at each individual price?”

Different people are willing to pay a different price for the same good. Some people have a lot of money, or they really like a good, so they would be willing to buy it for a high price. For example, there is somewhere out there that would pay $10 for a can of a soft drink. Those “high paying people” are the points over on the “top” of the demand curve, where the price is high, and the corresponding quantity is low. “At a high price, only few customers are willing and able to purchase the good”.

But as the price slowly decreases (and you “move along” the demand curve from top to bottom), more and more interested buyers appear, until all possible interested buyers show up when the price eventually hits 0.

Also, as you’re looking at the demand curve, one curve, there is no “highest demand” and “lowest demand”. There are high points on the curve, there are low points on the curve, but the demand is that one, whole line. Demand can increase if the whole curve shifts to the right, or decrease if it shifts to the left.