graphical representation a demand schedule

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What Is a Demand Schedule?

• How It Works
• Demand vs. Supply Schedules

Additional Factors on Demand

Importance of a demand schedule.

• Limitations
• Demand Schedule FAQs

The Bottom Line

• Corporate Finance
• Corporate Finance Basics

Demand Schedule: Definition, Examples, and How to Graph One

In economics, a demand schedule is a table that shows the quantity demanded of a good or service at different price levels. A demand schedule can be graphed as a continuous demand curve on a chart where the Y-axis represents price and the X-axis represents quantity.

Key Takeaways

• Analysts can estimate the demand for a good at any point along the demand schedule.
• Demand schedules, used in conjunction with supply schedules, provide a visual depiction of the supply and demand dynamics of a market.
• Demand schedules are used to forecast the raw materials and labor needed during manufacturing should management decide to sell goods at one price over another.
• Demand schedules inform management of the elasticity of a product, the response in demand of a good based on changing prices.
• Demand schedules do have limitations, as they must be continually revised to match true market expectations as well as they do not incorporate non-financial impacts to demand.

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Understanding Demand Schedules

A demand schedule most commonly consists of two columns. The first column lists the price for a product in ascending or descending order. The second column lists the quantity of the product desired or demanded at that price. The price is determined based on research on the market.

When the data in the demand schedule is graphed to create the demand curve, it supplies a visual demonstration of the relationship between price and demand, allowing easy estimation of the demand for a product or service at any point along the curve.

A demand schedule tabulates the quantity of goods that consumers will purchase at given prices.

Demand Schedules vs. Supply Schedules

A demand schedule is typically used in conjunction with a supply schedule, which shows the quantity of a good that would be supplied to the market by producers at given price levels. By graphing both schedules on a chart with the axes described above, it is possible to obtain a graphical representation of the supply and demand dynamics of a particular market.

In a typical supply and demand relationship, as the price of a good or service rises, the quantity demanded tends to fall. If all other factors are equal, the market reaches an equilibrium where the supply and demand schedules intersect. At this point, the corresponding price is the equilibrium market price, and the corresponding quantity is the equilibrium quantity exchanged in the market.

Price is not the sole factor that determines the demand for a particular product. Demand may also be affected by the amount of disposable income available, shifts in the quality of the goods in question, effective advertising, and even weather patterns.

Price changes of related goods or services may also affect demand. If the price of one product rises, demand for a substitute may rise, while a fall in the price of a product may increase demand for its complements . For example, a rise in the price of one brand of coffeemaker may increase the demand for a relatively cheaper coffeemaker produced by a competitor. If the price of all coffeemakers falls, the demand for coffee, a complement to the coffeemaker market, may rise as consumers take advantage of the price decline in coffeemakers.

Demand schedules play an important part in economics in projecting future economic activity and for management to predict how their product(s) will perform. For this reason, there are many different aspects of value to a demand schedule.

• Demand schedules drive pricing decisions. Companies can aggregate data and analyze where the price point makes the most sense for the demand they want to achieve in the market. The ultimate price a consumer pays for the good they want is often dictated by the relationship between points along this demand schedule.
• Demand schedules inform of elasticity . Though it's really the underlying data that drives the information, demand schedules clearly communicate whether products are elastic or inelastic. An elastic product can have its price materially changed without a major impact on the demand for the good. Inelastic goods may suffer severe declines during price increases, though. This information better informs management of how to handle pricing strategy.
• Demand schedules lead manufacturing estimates. Once a company has selected its price point, the company can then use the demand schedule to understand how many units it expects to sell over time. This means the company can better forecast what raw materials, equipment, and labor it will need at what times to deliver expectations to the market. This may also allow the company to plan ahead and lock into favorable pricing knowing there may be a certain level of demand at given points in time.
• Demand schedules translate to other products. Once a company better understands the market and its specific consumer base, the company can leverage that information to other products. This includes forecasting what may happen if the company launches a brand-new product or line in the future.

Some demand schedule curves are not gradual. Consider a gift card for $100. If a company sells it for less than $100, demand will be substantially higher. If a company sells it for more than $100, there theoretically be no financial demand for the gift card (unless there are other factors to consider such as charitable donations).

Limitations of a Demand Schedule

There are several downsides to a demand schedule. Though the law of demand is primarily focused on a good's price, there are other factors that may cause changes in the demand for a product such as consumer preference, product utility, market innovation, and global circumstances such a weather.

Demand schedules also face the risk of obsolescence and being outdated if they are not periodically reviewed. For example, consider the latest iPhone model and the potential demand schedule for the good. Upon the announcement of the next iPhone model, there may be immediate implications to the demand schedule of the prior version. By extension, the demand schedule is handcuffed to the demand curve, and the demand curve does shift based on external factors.

Last, the demand schedule is simply a forecast. There's no way of knowing the projections will actually materialize until a product is brought to market, time passes, and data can be analyzed. Companies would be best suited on comparing forecast demand schedules with actual demand schedules to ensure they are continually learning from prior estimates.

Example of a Demand Schedule

Consider an example of a company trying to determine the best pricing strategy for its brand new 40" 4K HDTV. The company has performed market analysis including conducting surveys of potential consumers and has pulled together the following demand schedule.

From this curve, the company realizes there is substantial demand for the product as the price decreases (which is standard for the law of demand). However, the company is disappointed in how quickly the demand curve appears to have dropped off once the television is priced at greater than $1,000. It decides to do another market survey, but this time is approaches two geographical markets.

Several conclusions can be pulled from this second demand schedule. First, the demand curve is much less steep; consumers in the second market don't dramatically have more demand for the TV as the price declines like the first market. The other main takeaway is that demand is simply lower. For this reason, the company could leverage this information to (1) attempt to sell fewer TVs in the second market at a higher price point and (2) attempt to sell more TVs in the first market at a lower price point.

What Information Does a Demand Schedule Show?

A demand schedule is meant to inform a manufacturer, distributor, or retailer of consumer demand for a product at different price points . This information may or may not incorporate a time series where the demand schedule can be tracked over time. Alternatively, a demand schedule from different markets may be compiled and shown against each other for comparative analysis.

What Are the 2 Types of Demand Schedules?

Demand schedules may be prepared for individual consumers or for the broad, general market. These two demand schedules will differ as the market demand schedule will encompass a more broad set of expectations while an individual demand schedule may be more refined into a specific subset of data.

What Are Demand Schedules Used for?

Demand schedules are used to make manufacturing plans, forecast sales, ensure appropriate resources are on hand to meet demand, and to set pricing strategies. The demand schedule summarizes the economic impact of how rising prices can influence the demand of a good (and vice versa).

A demand schedule is a series of points that identify what consumer demand will be for a product at different price points. Businesses use this information to make smarter business decisions, as sometimes it is not always in the best interest to simply try and sell a product for the highest possible price. This information from a demand schedule also informs management of selling, manufacturing, and delivery needs in the future.

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Learning Objectives

• Define the quantity demanded of a good or service and illustrate it using a demand schedule and a demand curve.
• Distinguish between the following pairs of concepts: demand and quantity demanded, demand schedule and demand curve, movement along and shift in a demand curve.
• Identify demand shifters and determine whether a change in a demand shifter causes the demand curve to shift to the right or to the left.

How many pizzas will people eat this year? How many doctor visits will people make? How many houses will people buy?

Each good or service has its own special characteristics that determine the quantity people are willing and able to consume. One is the price of the good or service itself. Other independent variables that are important determinants of demand include consumer preferences, prices of related goods and services, income, demographic characteristics such as population size, and buyer expectations. The number of pizzas people will purchase, for example, depends very much on whether they like pizza. It also depends on the prices for alternatives such as hamburgers or spaghetti. The number of doctor visits is likely to vary with income—people with higher incomes are likely to see a doctor more often than people with lower incomes. The demands for pizza, for doctor visits, and for housing are certainly affected by the age distribution of the population and its size.

While different variables play different roles in influencing the demands for different goods and services, economists pay special attention to one: the price of the good or service. Given the values of all the other variables that affect demand, a higher price tends to reduce the quantity people demand, and a lower price tends to increase it. A medium pizza typically sells for $5 to $10. Suppose the price were $30. Chances are, you would buy fewer pizzas at that price than you do now. Suppose pizzas typically sold for $2 each. At that price, people would be likely to buy more pizzas than they do now.

We will discuss first how price affects the quantity demanded of a good or service and then how other variables affect demand.

Price and the Demand Curve

Because people will purchase different quantities of a good or service at different prices, economists must be careful when speaking of the “demand” for something. They have therefore developed some specific terms for expressing the general concept of demand.

The quantity demanded of a good or service is the quantity buyers are willing and able to buy at a particular price during a particular period, all other things unchanged. (As we learned, we can substitute the Latin phrase “ceteris paribus” for “all other things unchanged.”) Suppose, for example, that 100,000 movie tickets are sold each month in a particular town at a price of $8 per ticket. That quantity—100,000—is the quantity of movie admissions demanded per month at a price of $8. If the price were $12, we would expect the quantity demanded to be less. If it were $4, we would expect the quantity demanded to be greater. The quantity demanded at each price would be different if other things that might affect it, such as the population of the town, were to change. That is why we add the qualifier that other things have not changed to the definition of quantity demanded.

A demand schedule is a table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged. To introduce the concept of a demand schedule, let us consider the demand for coffee in the United States. We will ignore differences among types of coffee beans and roasts, and speak simply of coffee. The table in Figure 3.1 “A Demand Schedule and a Demand Curve” shows quantities of coffee that will be demanded each month at prices ranging from $9 to $4 per pound; the table is a demand schedule. We see that the higher the price, the lower the quantity demanded.

Figure 3.1 A Demand Schedule and a Demand Curve

The table is a demand schedule; it shows quantities of coffee demanded per month in the United States at particular prices, all other things unchanged. These data are then plotted on the demand curve. At point A on the curve, 25 million pounds of coffee per month are demanded at a price of $6 per pound. At point B, 30 million pounds of coffee per month are demanded at a price of $5 per pound.

The information given in a demand schedule can be presented with a demand curve , which is a graphical representation of a demand schedule. A demand curve thus shows the relationship between the price and quantity demanded of a good or service during a particular period, all other things unchanged. The demand curve in Figure 3.1 “A Demand Schedule and a Demand Curve” shows the prices and quantities of coffee demanded that are given in the demand schedule. At point A, for example, we see that 25 million pounds of coffee per month are demanded at a price of $6 per pound. By convention, economists graph price on the vertical axis and quantity on the horizontal axis.

Price alone does not determine the quantity of coffee or any other good that people buy. To isolate the effect of changes in price on the quantity of a good or service demanded, however, we show the quantity demanded at each price, assuming that those other variables remain unchanged. We do the same thing in drawing a graph of the relationship between any two variables; we assume that the values of other variables that may affect the variables shown in the graph (such as income or population) remain unchanged for the period under consideration.

A change in price, with no change in any of the other variables that affect demand, results in a movement along the demand curve. For example, if the price of coffee falls from $6 to $5 per pound, consumption rises from 25 million pounds to 30 million pounds per month. That is a movement from point A to point B along the demand curve in Figure 3.1 “A Demand Schedule and a Demand Curve” . A movement along a demand curve that results from a change in price is called a change in quantity demanded . Note that a change in quantity demanded is not a change or shift in the demand curve; it is a movement along the demand curve.

The negative slope of the demand curve in Figure 3.1 “A Demand Schedule and a Demand Curve” suggests a key behavioral relationship of economics. All other things unchanged, the law of demand holds that, for virtually all goods and services, a higher price leads to a reduction in quantity demanded and a lower price leads to an increase in quantity demanded.

The law of demand is called a law because the results of countless studies are consistent with it. Undoubtedly, you have observed one manifestation of the law. When a store finds itself with an overstock of some item, such as running shoes or tomatoes, and needs to sell these items quickly, what does it do? It typically has a sale, expecting that a lower price will increase the quantity demanded. In general, we expect the law of demand to hold. Given the values of other variables that influence demand, a higher price reduces the quantity demanded. A lower price increases the quantity demanded. Demand curves, in short, slope downward.

Changes in Demand

Of course, price alone does not determine the quantity of a good or service that people consume. Coffee consumption, for example, will be affected by such variables as income and population. Preferences also play a role. The story at the beginning of the chapter illustrates as much. Starbucks “turned people on” to coffee. We also expect other prices to affect coffee consumption. People often eat doughnuts or bagels with their coffee, so a reduction in the price of doughnuts or bagels might induce people to drink more coffee. An alternative to coffee is tea, so a reduction in the price of tea might result in the consumption of more tea and less coffee. Thus, a change in any one of the variables held constant in constructing a demand schedule will change the quantities demanded at each price. The result will be a shift in the entire demand curve rather than a movement along the demand curve. A shift in a demand curve is called a change in demand .

Suppose, for example, that something happens to increase the quantity of coffee demanded at each price. Several events could produce such a change: an increase in incomes, an increase in population, or an increase in the price of tea would each be likely to increase the quantity of coffee demanded at each price. Any such change produces a new demand schedule. Figure 3.2 “An Increase in Demand” shows such a change in the demand schedule for coffee. We see that the quantity of coffee demanded per month is greater at each price than before. We show that graphically as a shift in the demand curve. The original curve, labeled D 1 , shifts to the right to D 2 . At a price of $6 per pound, for example, the quantity demanded rises from 25 million pounds per month (point A) to 35 million pounds per month (point A′).

Figure 3.2 An Increase in Demand

An increase in the quantity of a good or service demanded at each price is shown as an increase in demand. Here, the original demand curve D 1 shifts to D 2 . Point A on D 1 corresponds to a price of $6 per pound and a quantity demanded of 25 million pounds of coffee per month. On the new demand curve D 2 , the quantity demanded at this price rises to 35 million pounds of coffee per month (point A′).

Just as demand can increase, it can decrease. In the case of coffee, demand might fall as a result of events such as a reduction in population, a reduction in the price of tea, or a change in preferences. For example, a definitive finding that the caffeine in coffee contributes to heart disease, which is currently being debated in the scientific community, could change preferences and reduce the demand for coffee.

A reduction in the demand for coffee is illustrated in Figure 3.3 “A Reduction in Demand” . The demand schedule shows that less coffee is demanded at each price than in Figure 3.1 “A Demand Schedule and a Demand Curve” . The result is a shift in demand from the original curve D 1 to D 3 . The quantity of coffee demanded at a price of $6 per pound falls from 25 million pounds per month (point A) to 15 million pounds per month (point A″). Note, again, that a change in quantity demanded, ceteris paribus, refers to a movement along the demand curve, while a change in demand refers to a shift in the demand curve.

Figure 3.3 A Reduction in Demand

A reduction in demand occurs when the quantities of a good or service demanded fall at each price. Here, the demand schedule shows a lower quantity of coffee demanded at each price than we had in Figure 3.1 “A Demand Schedule and a Demand Curve” . The reduction shifts the demand curve for coffee to D 3 from D 1 . The quantity demanded at a price of $6 per pound, for example, falls from 25 million pounds per month (point A) to 15 million pounds of coffee per month (point A″).

A variable that can change the quantity of a good or service demanded at each price is called a demand shifter . When these other variables change, the all-other-things-unchanged conditions behind the original demand curve no longer hold. Although different goods and services will have different demand shifters, the demand shifters are likely to include (1) consumer preferences, (2) the prices of related goods and services, (3) income, (4) demographic characteristics, and (5) buyer expectations. Next we look at each of these.

Preferences

Changes in preferences of buyers can have important consequences for demand. We have already seen how Starbucks supposedly increased the demand for coffee. Another example is reduced demand for cigarettes caused by concern about the effect of smoking on health. A change in preferences that makes one good or service more popular will shift the demand curve to the right. A change that makes it less popular will shift the demand curve to the left.

Prices of Related Goods and Services

Suppose the price of doughnuts were to fall. Many people who drink coffee enjoy dunking doughnuts in their coffee; the lower price of doughnuts might therefore increase the demand for coffee, shifting the demand curve for coffee to the right. A lower price for tea, however, would be likely to reduce coffee demand, shifting the demand curve for coffee to the left.

In general, if a reduction in the price of one good increases the demand for another, the two goods are called complements . If a reduction in the price of one good reduces the demand for another, the two goods are called substitutes . These definitions hold in reverse as well: two goods are complements if an increase in the price of one reduces the demand for the other, and they are substitutes if an increase in the price of one increases the demand for the other. Doughnuts and coffee are complements; tea and coffee are substitutes.

Complementary goods are goods used in conjunction with one another. Tennis rackets and tennis balls, eggs and bacon, and stationery and postage stamps are complementary goods. Substitute goods are goods used instead of one another. iPODs, for example, are likely to be substitutes for CD players. Breakfast cereal is a substitute for eggs. A file attachment to an e-mail is a substitute for both a fax machine and postage stamps.

As incomes rise, people increase their consumption of many goods and services, and as incomes fall, their consumption of these goods and services falls. For example, an increase in income is likely to raise the demand for gasoline, ski trips, new cars, and jewelry. There are, however, goods and services for which consumption falls as income rises—and rises as income falls. As incomes rise, for example, people tend to consume more fresh fruit but less canned fruit.

A good for which demand increases when income increases is called a normal good . A good for which demand decreases when income increases is called an inferior good . An increase in income shifts the demand curve for fresh fruit (a normal good) to the right; it shifts the demand curve for canned fruit (an inferior good) to the left.

Demographic Characteristics

The number of buyers affects the total quantity of a good or service that will be bought; in general, the greater the population, the greater the demand. Other demographic characteristics can affect demand as well. As the share of the population over age 65 increases, the demand for medical services, ocean cruises, and motor homes increases. The birth rate in the United States fell sharply between 1955 and 1975 but has gradually increased since then. That increase has raised the demand for such things as infant supplies, elementary school teachers, soccer coaches, in-line skates, and college education. Demand can thus shift as a result of changes in both the number and characteristics of buyers.

Buyer Expectations

The consumption of goods that can be easily stored, or whose consumption can be postponed, is strongly affected by buyer expectations. The expectation of newer TV technologies, such as high-definition TV, could slow down sales of regular TVs. If people expect gasoline prices to rise tomorrow, they will fill up their tanks today to try to beat the price increase. The same will be true for goods such as automobiles and washing machines: an expectation of higher prices in the future will lead to more purchases today. If the price of a good is expected to fall, however, people are likely to reduce their purchases today and await tomorrow’s lower prices. The expectation that computer prices will fall, for example, can reduce current demand.

It is crucial to distinguish between a change in quantity demanded, which is a movement along the demand curve caused by a change in price, and a change in demand, which implies a shift of the demand curve itself. A change in demand is caused by a change in a demand shifter. An increase in demand is a shift of the demand curve to the right. A decrease in demand is a shift in the demand curve to the left. This drawing of a demand curve highlights the difference.

Key Takeaways

• The quantity demanded of a good or service is the quantity buyers are willing and able to buy at a particular price during a particular period, all other things unchanged.
• A demand schedule is a table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged.
• A demand curve shows graphically the quantities of a good or service demanded at different prices during a particular period, all other things unchanged.
• All other things unchanged, the law of demand holds that, for virtually all goods and services, a higher price induces a reduction in quantity demanded and a lower price induces an increase in quantity demanded.
• A change in the price of a good or service causes a change in the quantity demanded—a movement along the demand curve.
• A change in a demand shifter causes a change in demand, which is shown as a shift of the demand curve. Demand shifters include preferences, the prices of related goods and services, income, demographic characteristics, and buyer expectations.
• Two goods are substitutes if an increase in the price of one causes an increase in the demand for the other. Two goods are complements if an increase in the price of one causes a decrease in the demand for the other.
• A good is a normal good if an increase in income causes an increase in demand. A good is an inferior good if an increase in income causes a decrease in demand.

All other things unchanged, what happens to the demand curve for DVD rentals if there is (a) an increase in the price of movie theater tickets, (b) a decrease in family income, or (c) an increase in the price of DVD rentals? In answering this and other “Try It!” problems in this chapter, draw and carefully label a set of axes. On the horizontal axis of your graph, show the quantity of DVD rentals. It is necessary to specify the time period to which your quantity pertains (e.g., “per period,” “per week,” or “per year”). On the vertical axis show the price per DVD rental. Since you do not have specific data on prices and quantities demanded, make a “free-hand” drawing of the curve or curves you are asked to examine. Focus on the general shape and position of the curve(s) before and after events occur. Draw new curve(s) to show what happens in each of the circumstances given. The curves could shift to the left or to the right, or stay where they are.

Case in Point: Solving Campus Parking Problems Without Adding More Parking Spaces

Alden Jewell – The Parking Lot – CC BY 2.0.

Unless you attend a “virtual” campus, chances are you have engaged in more than one conversation about how hard it is to find a place to park on campus. Indeed, according to Clark Kerr, a former president of the University of California system, a university is best understood as a group of people “held together by a common grievance over parking.”

Clearly, the demand for campus parking spaces has grown substantially over the past few decades. In surveys conducted by Daniel Kenney, Ricardo Dumont, and Ginger Kenney, who work for the campus design company Sasaki and Associates, it was found that 7 out of 10 students own their own cars. They have interviewed “many students who confessed to driving from their dormitories to classes that were a five-minute walk away,” and they argue that the deterioration of college environments is largely attributable to the increased use of cars on campus and that colleges could better service their missions by not adding more parking spaces.

Since few universities charge enough for parking to even cover the cost of building and maintaining parking lots, the rest is paid for by all students as part of tuition. Their research shows that “for every 1,000 parking spaces, the median institution loses almost $400,000 a year for surface parking, and more than $1,200,000 for structural parking.” Fear of a backlash from students and their parents, as well as from faculty and staff, seems to explain why campus administrators do not simply raise the price of parking on campus.

While Kenney and his colleagues do advocate raising parking fees, if not all at once then over time, they also suggest some subtler, and perhaps politically more palatable, measures—in particular, shifting the demand for parking spaces to the left by lowering the prices of substitutes.

Two examples they noted were at the University of Washington and the University of Colorado at Boulder. At the University of Washington, car poolers may park for free. This innovation has reduced purchases of single-occupancy parking permits by 32% over a decade. According to University of Washington assistant director of transportation services Peter Dewey, “Without vigorously managing our parking and providing commuter alternatives, the university would have been faced with adding approximately 3,600 parking spaces, at a cost of over $100 million…The university has created opportunities to make capital investments in buildings supporting education instead of structures for cars.” At the University of Colorado, free public transit has increased use of buses and light rail from 300,000 to 2 million trips per year over the last decade. The increased use of mass transit has allowed the university to avoid constructing nearly 2,000 parking spaces, which has saved about $3.6 million annually.

Sources: Daniel R. Kenney, “How to Solve Campus Parking Problems Without Adding More Parking,” The Chronicle of Higher Education , March 26, 2004, Section B, pp. B22-B23.

Answer to Try It! Problem

Since going to the movies is a substitute for watching a DVD at home, an increase in the price of going to the movies should cause more people to switch from going to the movies to staying at home and renting DVDs. Thus, the demand curve for DVD rentals will shift to the right when the price of movie theater tickets increases [Panel (a)].

A decrease in family income will cause the demand curve to shift to the left if DVD rentals are a normal good but to the right if DVD rentals are an inferior good. The latter may be the case for some families, since staying at home and watching DVDs is a cheaper form of entertainment than taking the family to the movies. For most others, however, DVD rentals are probably a normal good [Panel (b)].

An increase in the price of DVD rentals does not shift the demand curve for DVD rentals at all; rather, an increase in price, say from P 1 to P 2 , is a movement upward to the left along the demand curve. At a higher price, people will rent fewer DVDs, say Q 2 instead of Q 1 , ceteris paribus [Panel (c)].

Principles of Economics Copyright © 2016 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Home > Finance > Demand Schedule: Definition, Examples, And How To Graph One

Demand Schedule: Definition, Examples, And How To Graph One

Published: November 10, 2023

Learn what a demand schedule is in finance, including definition, examples, and how to graph one. Explore the key concepts and apply them to your financial analysis.

• Definition starting with D

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Demand Schedule: Definition, Examples, and How to Graph One

Understanding demand is crucial in the world of finance. When planning business strategies, pricing products, or analyzing market trends, having a clear grasp of demand is essential. Today, we’re diving into the concept of demand schedule, explaining what it is, providing examples, and teaching you how to graph one. So, let’s get started!

Key Takeaways:

• A demand schedule is a table that shows the quantity of a product or service that consumers are willing and able to purchase at different price points.
• Plotting a demand schedule on a graph helps visualize the relationship between price and quantity demanded.

What is a Demand Schedule?

A demand schedule is a tool used to depict the relationship between the price of a product or service and the quantity consumers are willing and able to purchase at various price levels. It provides valuable insights into the demand curve, allowing businesses to understand how changing prices impact consumer behavior.

Here’s an easy way to understand a demand schedule:

• A demand schedule is like a menu at a restaurant, where customers can choose from a variety of dishes at different prices.
• Each row in the demand schedule represents a different price point, while the corresponding column indicates the quantity of a product or service that consumers are willing to buy at that specific price.

Now that we know what a demand schedule is, let’s look at a concrete example:

Demand Schedule Example: Ice Cream Cones

Imagine you’re running an ice cream stand, and you want to understand the demand for your popular ice cream cones. You gather data for different price points and record the corresponding quantity demanded in a demand schedule, which might look like this:

By analyzing this demand schedule, we can observe that as the price increases, the quantity demanded decreases. This inverse relationship between price and quantity demanded is a fundamental concept in economics.

Graphing a Demand Schedule

Graphing a demand schedule allows us to visualize the data in a more tangible way, helping us understand the relationship between price and quantity demanded. To graph a demand schedule, follow these steps:

• On the X-axis (horizontal axis), plot the price points from the demand schedule.
• On the Y-axis (vertical axis), plot the corresponding quantity demanded.
• Connect the plotted points to form a demand curve.

Using our previous ice cream cone example, we can graph the demand schedule as follows:

By graphing the demand schedule, we can visually analyze the relationship between price and quantity demanded. It’s clear that as the price increases, the quantity demanded decreases, forming a downward-sloping demand curve.

Wrapping Up

A demand schedule is a valuable tool for businesses seeking to understand customer demand and its correlation with price. By creating a demand schedule, analyzing the data, and graphing it, businesses can gain insights into consumer behavior and make informed decisions about pricing and market strategies.

So, the next time you’re planning a business strategy or analyzing market trends, remember the power of the demand schedule and its ability to uncover valuable insights!

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Supply and Demand Curves Explained

Introduction.

In economics, supply and demand curves govern the allocation of resources and the determination of prices in free markets. These curves illustrate the interaction between producers and consumers to determine the price of goods and the quantity traded.

We shall explain the concepts of supply, demand, and market equilibrium in a simple way. Understanding these fundamental concepts will help the reader comprehend the workings of the price mechanism in free markets.

Supply: Understanding the Behaviour of Producers

Supply means the willingness and ability of firms to sell different quantities of a good at various prices in a given time period, ceteris paribus. The word ceteris paribus means that all non-price factors are assumed to be constant.

Quantity Supplied

The quantity supplied is the number of units of a good that firms are willing and able to sell at a specific price in a given time period, ceteris paribus.

The Law of Supply

The law of supply states that there is a positive or direct relationship between the price of a good and the quantity supplied, ceteris paribus.

The Supply Schedule

The supply schedule is a table that shows the positive or direct relationship between the price of a good and its quantity supplied, ceteris paribus. Consider the following simple supply schedule:

In the above supply schedule, the left column shows an increase in price, while, the right column shows a corresponding increase in the quantity supplied of a product. This shows the positive or direct relationship between the price of a product and its quantity supplied, ceteris paribus.

Supply refers to the whole supply schedule and does not change when the price of the product changes. A change in the price of a good causes a change in its quantity supplied, while, a change in any non-price factor causes a change in supply.

The Supply Curve

The supply curve is a curve that shows a positive or direct relationship between the price of a good and its quantity supplied, ceteris paribus. It is the graphical representation of the supply schedule. The following graph illustrates the supply curve based on the data in above table.

In the above supply curve, the quantity supplied of a good is taken on the X-axis (horizontal axis) and the price on the Y-axis (vertical axis). The upward sloping supply curve S0 shows the positive or direct relationship between the price of a good and its quantity supplied, ceteris paribus.

Movement along the Supply Curve

Movement along the same supply curve is caused by a change in the price of product. It can be an extension or a contraction in supply.

Extension in Supply

An increase in the quantity supplied of a good due to an increase in its price is called an extension in supply.

It is illustrated by the following diagram:

The movement from point A to point B is an extension in supply.

Contraction in Supply

A decrease in the quantity supplied of a good due to a decrease in its price is called a contraction in supply.

The movement from point A to point B is a contraction in supply.

Shift of the Supply Curve

A supply curve shifts due to a change in any non-price factor. The shifts in supply curves can be a rise or a fall in supply.

Rise in Supply

The rightward shift of the supply curve is called the rise in supply. It occurs when the whole supply schedule is increased due to a change in any non-price factor.

Fall in Supply

The leftward shift of the supply curve is called the fall in supply. It occurs when the whole supply schedule is decreased due to a change in any non-price factor.

The following diagram illustrates the rise and fall in supply.

The rise in the supply curve is from S0 to S1, while the fall in the supply curve is from S0 to S2.

Factors Affecting Supply

There are many factors affecting the supply of a product in the market. Some of them are explained below.

Cost of Production

Firms consider their production costs, including labour, raw materials, and overhead expenses, which can affect the quantity they are willing to supply. An increase in the cost of production due to higher input prices, expensive utilities or higher prices of components can lead to a fall in the supply of a product and vice versa.

Technological Advances

Innovations and advancements in production methods can enhance efficiency, reduce costs, and increase the quantity that producers are willing to supply.

Resource Availability

The availability of key inputs or factors of production, such as natural resources and skilled labor, influences the production capacity and ultimately impacts the quantity supplied.

Government Policies

Government regulations, taxes, subsidies, and trade barriers can influence production costs and affect the quantity supplied by altering incentives for producers.

For more details, you can read the article on the supply shifters .

Price Elasticity of Supply (PES)

The degree of responsiveness of the quantity supplied of a good to the change in its price alone is called the price elasticity of supply.

Elastic supply implies that a small percentage change in price results in a large percentage change in quantity supplied, while inelastic supply indicates a small percentage change in quantity supplied in response to price changes.

Demand: Understanding the Behaviour of Consumers

Demand means the willingness and ability of buyers to buy different quantities of a good at various prices in a given time period, ceteris paribus. The word ceteris paribus means that all non-price factors are assumed to be constant.

Quantity Demanded

The quantity demanded is the number of units of a good which buyers are willing and able to buy at a specific price in a given time period, ceteris paribus.

The Law of Demand

The law of demand states that there is a negative or inverse relationship between price of a good and its quantity demanded, ceteris paribus.

The Demand Schedule

The demand schedule is a table which shows the negative or inverse relationship between the price of a good and its quantity demanded, ceteris paribus. Consider the following simple demand schedule:

In the above demand schedule, the left column shows a decrease in price while, the right column shows a corresponding increase in quantity demanded of a product. This shows the negative or inverse relationship between the price of a product and its quantity demanded, ceteris paribus.

Demand refers to the whole demand schedule and does not change when the price of the product changes. A change in the price of a good causes a change in its quantity demanded, while, a change in any non-price factor causes a change in demand.

The Demand Curve

The demand curve is a curve which shows a negative or inverse relationship between the price of a good and its quantity demanded, ceteris paribus. It is the graphical representation of the demand schedule. The following demand graph illustrates the demand curve based on the data in above table.

In the above demand curve, the quantity demand of a good is taken on X-axis (horizontal axis) and the price on the Y-axis (vertical axis). The downward sloping demand curve D0 shows the negative or inverse relationship between the price of a good and its quantity demanded, ceteris paribus. The normal demand curves have downward slopes.

Movement along the Demand Curve

Movement along the same demand curve is caused by a change in the price of product. It can be an extension or a contraction in demand.

Extension in Demand

An increase in the quantity demanded of a good due to a decrease in its price is called an extension in demand.

It is illustrated by the following diagram.

The movement from point A to point B is an extension in demand.

Contraction in Demand

A decrease in the quantity demanded of a good due to an increase in its price is called a contraction in demand.

The movement from point A to point B is a contraction in demand.

Shift of the Demand Curve

Shift of the demand curve is caused by a change in any non-price factor. It can be a rise or a fall in demand.

Rise in Demand

The rightward shift of the demand curve is called the rise in demand. It occurs when the whole demand schedule is increased due to a change in any non-price factor.

Fall in Demand

The leftward shift of the demand curve is called the fall in demand. It occurs when the whole demand schedule is decreased due to a change in any non-price factor.

The following diagram illustrates the rise and the fall in demand.

The rise in the demand curve is from D0 to D1, while the fall in the supply curve is from D0 to D2.

Factors Affecting Demand

There are many factors affecting the demand of a product in the market. Some of them are explained below.

Consumer Income

Changes in consumer income can influence demand due to changes in the purchasing power of consumers. For normal goods, an increase in income leads to higher demand, while for inferior goods, the opposite holds true.

Consumer Preferences

Individual tastes, preferences, and trends impact the demand for goods and services. Changing consumer preferences can result in shifts in demand for specific products.

Population Changes

Shifts in population size, demographic composition, and age distribution can affect the overall demand for goods and services in an economy.

Advertising

Advertising done by firms can change the demand of a product. For example, an advertising by a seller of flavoured milk may emphasise its health benefits and its demand will increase without a change in its price.

Prices of Related Goods

The change in the price of another good can also cause the shift in demand. For example, increase increase in the price of Pepsi can increase the demand for Coca Cola (Pepsi and Coca Cola are substitute goods). Like the prices of substitute goods, the change in the price of a complement can also shift the demand for a product.

Price Elasticity of Demand (PED)

The degree of responsiveness of the quantity demanded of a good to the change in its price alone is called the price elasticity of demand.

Elastic demand means that a small percentage change in price leads to a large percentage change in quantity demanded, while inelastic demand indicates a small percentage change in quantity demanded in response to price changes.

Market Equilibrium: Understanding the Interaction of Producers and Consumers

Market equilibrium occurs when the quantity supplied equals the quantity demanded at a particular price.

The intersection of the market supply curve and the market demand curve represents the equilibrium price and equilibrium quantity in the market. This is illustrated by the following diagram.

In above graph, the equilibrium point is E0 where the demand curve intersects the supply curve. P0 is the equilibrium price and Q0 is the equilibrium quantity.

Market Disequilibrium

Market disequilibrium occurs when the quantity supplied is not equal to the quantity demanded at a particular price. It can be a market surplus or a market shortage. When a surplus or shortage occurs, market forces and the price mechanism work to restore equilibrium.

Market Surplus (Excess Supply)

When the quantity supplied exceeds the quantity demanded at a given price, a surplus occurs. This surplus puts downward pressure on prices, encouraging producers to decrease their output or adjust prices to clear the excess supply.

This is illustrated by the following graph.

Market Shortage (Excess Demand)

When the quantity demanded exceeds the quantity supplied at a given price, a shortage arises. This shortage drives prices upward as consumers compete for limited supply, prompting producers to increase output or raise prices to meet the higher demand.

Changes in Market Equilibrium

Market equilibrium can change due to the shift in demand, the shift in supply or the simultaneous shift in the demand and the supply. After these shifts, a new equilibrium price (P1) and a new equilibrium quantity (Q1) is formed.

The supply and demand curves are fundamental concepts in economics and they are used to understand the behaviour of the consumers and the producers in the market of a commodity. These concepts are used by consumers, producers and the governments to make informed decisions.

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3.3: Demand and supply curves

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• Douglas Curtis and Ian Irvine
• Trent University & Concordia University via Lyryx

The demand curve is a graphical expression of the relationship between price and quantity demanded, holding other things constant. Figure 3.1 measures price on the vertical axis and quantity on the horizontal axis. The curve D represents the data from the first two columns of Table 3.1. Each combination of price and quantity demanded lies on the curve. In this case the curve is linear —it is a straight line. The demand curve slopes downward (technically we say that its slope is negative), reflecting the fact that buyers wish to purchase more when the price is less.

The demand curve is a graphical expression of the relationship between price and quantity demanded, with other influences remaining unchanged.

The supply curve is a graphical representation of the relationship between price and quantity supplied, holding other things constant. The supply curve S in Figure 3.2 is based on the data from columns 1 and 3 in Table 3.1. It, too, is linear, but has a positive slope indicating that suppliers wish to supply more at higher prices.

The supply curve is a graphical expression of the relationship between price and quantity supplied, with other influences remaining unchanged.

The demand and supply curves intersect at point E 0 , corresponding to a price of $4 which, as illustrated above, is the equilibrium price for this market. At any price below this the horizontal distance between the supply and demand curves represents excess demand, because demand exceeds supply. Conversely, at any price above $4 there is an excess supply that is again measured by the horizontal distance between the two curves. Market forces tend to eliminate excess demand and excess supply as we explained above. In the final section of the chapter we illustrate how the supply and demand curves can be 'solved' for the equilibrium price and quantity.

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Demand Schedule

What is a Demand Schedule?

Understanding demand schedule, demand curve.

• Applications

Demand Schedule: Definition, Components & Examples

In the realm of economics, understanding the concept of demand is crucial for businesses, economists, and policy makers alike. One key tool used in the analysis of demand is the “Demand Schedule”. This fundamental instrument provides a tabular representation of the relationship between the price of a good or service and the quantity of that good or service that consumers are willing and able to purchase, ceteris paribus (all other things being equal).

It plays a vital role in helping businesses price their products, manage inventory, and strategize for market trends, among other things. In this article, we will delve into the intricacies of the demand schedule, exploring its components, how it is created, its applications and limitations, and providing real-world examples of its use.

• A demand schedule presents the relationship between the price of a product and the quantity demanded by consumers.
• It helps illustrate the law of demand, which states that as the price of a product increases, the quantity demanded decreases, and vice versa.
• A demand schedule typically lists different price levels in one column and the corresponding quantity demanded in another column.

A demand schedule is a tool in economics that graphically illustrates the quantity of a good or service that consumers are willing to purchase at various price points. This schedule is essential for understanding the law of demand, which states that as the price of a good or service increases, consumer demand for it decreases, and vice versa, all other things being equal.

It can be presented in two formats: individual demand schedule and market schedule. An individual demand schedule represents the quantity demanded by an individual consumer at different price levels. On the other hand, a market schedule aggregates the individual demand schedules of all consumers in a market to show the total quantity demanded at different price levels.

Each row represents a different price for the good or service in question. Each column shows the quantity demanded at that price. The schedule allows for easy comparison of demand quantities at different prices and enables a quick visualization of how changes in price can affect consumer demand. This understanding is crucial for suppliers when deciding on pricing strategies, sales forecasts, and inventory management.

Components of a Demand Schedule

• Price of the Good or Service The different price levels at which the good or service is available for purchase are represented in the demand schedule. It is typically listed in descending order, starting with the highest price.
• Quantity Demanded This is the amount of the good or service that consumers are willing to purchase at each specific price point. This quantity can vary greatly based on the price and is generally inversely proportional to it.
• Individual and Market Demand The demand schedule can represent the buying patterns of an individual consumer (individual schedule) or aggregate demand from all consumers in a given market (market schedule). The market demand schedule is often of greater interest to economists and businesses as it provides a more comprehensive view of market dynamics.
• Time Period It is typically related to a specific time period, which can range from one day to one year or more. This time period is important, as consumer demand can change over time due to various factors such as seasonal trends, changes in income, or changes in consumer preferences.

Creation of a Demand Schedule

• Identify the Good or Service Clearly define the product or service for which you are creating the demand schedule.
• Determine Price Points Decide on a range of different price points for the good or service. These prices should cover a range that is realistic for the product and the market.
• Estimate Quantity Demanded at Each Price For each of the price points identified, estimate the number of units that consumers would be willing to purchase at that price. This estimation can be derived from past sales data, market research, surveys, or demand forecasting techniques.
• Create a Table Construct a table with two columns. The first column should list the different price points, and the second column should list the corresponding quantity demanded. It’s common to list the price points in descending order, starting with the highest price.
• Plot the Demand Curve Once you have your demand schedule laid out in tabular form, you can then plot it on a graph, creating a demand curve. Price goes on the vertical axis (y-axis), and quantity demanded goes on the horizontal axis (x-axis).
• Consider the Time Frame Demand can change over time due to a variety of factors. Thus, it’s important to indicate the relevant time period your demand schedule covers.

A demand curve is a graphical representation of a demand schedule. It shows the relationship between the price of a good or service and the quantity of that good or service that consumers are willing and able to purchase at various prices.

The demand curve is typically downward sloping, indicating an inverse relationship between price and quantity demanded. As the price of a good or service decreases, the quantity demanded usually increases, and vice versa. This inverse relationship is known as the “law of demand.”

The demand curve can shift to the left or the right in response to changes in factors other than price, such as consumers’ income, preferences, expectations about future prices, or changes in the price of related goods.

A shift to the right represents an increase in demand, meaning consumers are willing to purchase more of the good or service at each price point. A shift to the left represents a decrease in demand, meaning consumers are willing to purchase less of the good or service at each price point.

In some cases, demand curves can have a different shape. For instance, a perfectly inelastic demand curve is vertical, indicating that quantity demanded does not change with price. Conversely, a perfectly elastic demand curve is horizontal, indicating that consumers are willing to buy any quantity of the product at a certain price, but nothing at all above that price.

The demand curve, together with the supply curve, forms the core of market economics, and it serves as a fundamental tool of economic analysis.

Applications of the Demand Schedule

The demand schedule and its graphical representation, the demand curve, are fundamental tools in economic analysis. Here are some of their practical applications:

• Price Determination Together with the supply schedule, the demand schedule helps to determine the equilibrium price in a market. The equilibrium price is the price at which the quantity demanded by consumers equals the quantity supplied by producers.
• Demand Forecasting Businesses can use demand schedules to predict how changes in price will affect the demand for their products. This can help them in planning production, setting prices, and developing marketing strategies.
• Policy Making Governments can use demand schedules to understand how changes in policy might affect demand for certain goods or services. For example, a it could help to predict the effects of a proposed tax on tobacco products on the consumption of cigarettes.
• Consumer Surplus Demand schedules can be used to calculate consumer surplus, which is a measure of the economic benefit that consumers receive when they are able to purchase a product for a price that is less than the maximum they are willing to pay.
• Elasticity Analysis The shape and slope of the demand curve can provide insights into the price elasticity of demand for a product, which is a measure of the responsiveness of quantity demanded to changes in price. This information can be very useful to businesses in making pricing decisions.

In all these ways, the demand schedule plays a crucial role in understanding market dynamics and guiding economic decision-making.

Examples of Demand Schedule

A demand schedule is a tabular representation of the quantities of a good or service that consumers are willing and able to purchase at various prices, assuming all other non-price factors remain the same.

Here are a couple of examples to illustrate:

Example 1 – Demand for Apples

Let’s consider a simplified example where we are looking at the demand for apples in a local market. The price per apple (in USD) and the quantity demanded per day are as follows:

This table indicates that as the price of an apple increases, the quantity of apples that consumers are willing and able to purchase decreases, illustrating the law of demand.

Example 2 – Demand for Movie Tickets

Now let’s look at another example, considering the demand for movie tickets. The price per ticket (in USD) and the quantity demanded per week are as follows:

Again, we see that as the price of movie tickets increases, the quantity of tickets that consumers are willing and able to purchase decreases.

These are just simple examples, and actual demand schedules in real-life scenarios could be influenced by a wide variety of factors and could be much more complex. However, these examples serve to illustrate the basic principle.

A demand schedule is a tabular representation of the relationship between the price of a product and the corresponding quantity demanded by consumers.

A demand schedule is created by observing and recording the quantity demanded at various price levels, holding other factors constant.

A demand schedule shows the quantity demanded at different price points, helping to illustrate the inverse relationship between price and quantity demanded.

A demand schedule presents data in tabular form, while a demand curve represents the same information graphically.

Paul Boyce is an economics editor with over 10 years experience in the industry. Currently working as a consultant within the financial services sector, Paul is the CEO and chief editor of BoyceWire. He has written publications for FEE, the Mises Institute, and many others.

Further Reading

ECON102: Principles of Macroeconomics (2021.A.01)

Demand and supply, price and the demand curve.

Because people will purchase different quantities of a good or service at different prices, economists must be careful when speaking of the "demand" for something. They have therefore developed some specific terms for expressing the general concept of demand.

The quantity demanded of a good or service is the quantity buyers are willing and able to buy at a particular price during a particular period, all other things unchanged. (As we learned, we can substitute the Latin phrase "ceteris paribus" for "all other things unchanged"). Suppose, for example, that 100,000 movie tickets are sold each month in a particular town at a price of $8 per ticket. That quantity - 100,000 - is the quantity of movie admissions demanded per month at a price of $8. If the price were $12, we would expect the quantity demanded to be less. If it were $4, we would expect the quantity demanded to be greater. The quantity demanded at each price would be different if other things that might affect it, such as the population of the town, were to change. That is why we add the qualifier that other things have not changed to the definition of quantity demanded.

A demand schedule is a table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged. To introduce the concept of a demand schedule, let us consider the demand for coffee in the United States. We will ignore differences among types of coffee beans and roasts, and speak simply of coffee. The table in Figure 3.1 "A Demand Schedule and a Demand Curve" shows quantities of coffee that will be demanded each month at prices ranging from $9 to $4 per pound; the table is a demand schedule. We see that the higher the price, the lower the quantity demanded.

Figure 3.1 A Demand Schedule and a Demand Curve

The table is a demand schedule; it shows quantities of coffee demanded per month in the United States at particular prices, all other things unchanged. These data are then plotted on the demand curve. At point A on the curve, 25 million pounds of coffee per month are demanded at a price of $6 per pound. At point B, 30 million pounds of coffee per month are demanded at a price of $5 per pound.

The information given in a demand schedule can be presented with a demand curve , which is a graphical representation of a demand schedule. A demand curve thus shows the relationship between the price and quantity demanded of a good or service during a particular period, all other things unchanged. The demand curve in Figure 3.1 "A Demand Schedule and a Demand Curve" shows the prices and quantities of coffee demanded that are given in the demand schedule. At point A, for example, we see that 25 million pounds of coffee per month are demanded at a price of $6 per pound. By convention, economists graph price on the vertical axis and quantity on the horizontal axis.

Price alone does not determine the quantity of coffee or any other good that people buy. To isolate the effect of changes in price on the quantity of a good or service demanded, however, we show the quantity demanded at each price, assuming that those other variables remain unchanged. We do the same thing in drawing a graph of the relationship between any two variables; we assume that the values of other variables that may affect the variables shown in the graph (such as income or population) remain unchanged for the period under consideration.

A change in price, with no change in any of the other variables that affect demand, results in a movement along the demand curve. For example, if the price of coffee falls from $6 to $5 per pound, consumption rises from 25 million pounds to 30 million pounds per month. That is a movement from point A to point B along the demand curve in Figure 3.1 "A Demand Schedule and a Demand Curve". A movement along a demand curve that results from a change in price is called a change in quantity demanded . Note that a change in quantity demanded is not a change or shift in the demand curve; it is a movement along the demand curve.

The negative slope of the demand curve in Figure 3.1 "A Demand Schedule and a Demand Curve" suggests a key behavioral relationship in economics. All other things unchanged, the law of demand holds that, for virtually all goods and services, a higher price leads to a reduction in quantity demanded and a lower price leads to an increase in quantity demanded.

The law of demand is called a law because the results of countless studies are consistent with it. Undoubtedly, you have observed one manifestation of the law. When a store finds itself with an overstock of some item, such as running shoes or tomatoes, and needs to sell these items quickly, what does it do? It typically has a sale, expecting that a lower price will increase the quantity demanded. In general, we expect the law of demand to hold. Given the values of other variables that influence demand, a higher price reduces the quantity demanded. A lower price increases the quantity demanded. Demand curves, in short, slope downward.

Law of Demand: Schedule, Curve, Function, Assumptions and Exception

The law of demand describes the relationship between the quantity demanded and the price of a product.

It states that the demand for a product decreases with increase in its price and vice versa, while other factors are at constant.

Therefore, there is an inverse relationship between the price and quantity demanded of a product.

“The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers; or in other words, the amount demanded increases with a fall in price and diminishes with a rise in price”- Marshall.

Some of the definitions of law of demand given by different authors are as follows:

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According to Robertson, “Other things being equal, the lower the price at which a thing is offered, the more a man will be prepared to buy it.”

In the words of Marshall, “The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers; or in other words, the amount demanded increases with a fall in price and diminishes with a rise in price.”

According to Ferguson, “Law of Demand, the quantity demanded varies inversely with price.”

Demand is a dependent variable, while price is an independent variable.

Therefore, demand is a function of price and can be expressed as follows:

f = Functional Relationship

In the law of demand, other factors of demand (except price) should be kept constant as the demand is subject to various influences. If all the factors would be allowed to vary at the same time, this may counteract the law. The law of demand can be understood with the help of certain concepts, such as demand schedule, demand curve, and demand function.

Demand Schedule :

Demand schedule refers to a tabular representation of the relationship between price and quantity demanded. It demonstrates the quantity of a product demanded by an individual or a group of individuals at specified price and time.

Demand schedule can be categorized into two types, which are shown in Figure-2:

The two types of demand schedules (as shown in Figure-2) are explained as follows:

i. Individual Demand Schedule:

Refers to a tabular representation of quantity of products demanded by an individual at different prices and time.

Table-1 shows the individual demand schedule of product a purchased by Mr. Ram:

Following are the characteristics of individual demand schedule:

a. Demonstrates the effect of changing price on the buying behavior of customers rather than change in the demand for a product

b. Expresses the disparity in demand with the difference in the product’s price

c. Represents that at higher prices the quantity demanded reduces and vice versa

ii. Market Demand Schedule:

Shows a tabular representation of quantity demanded in aggregate by individuals at different prices and time. Therefore, it demonstrates the demand of a product in the market at different prices. The market demand schedule can be derived by aggregating the individual demand schedules.

Table-2 represents the market demand schedule prepared through the individual demand schedule of three individuals:

Market demand schedule also demonstrates an inverse relation between the quantity demanded and price of a product.

Demand Curve :

Demand curve shows a graphical representation of demand schedule. It can be made by plotting price and quantity demanded on a graph. In demand curve, price is represented on Y-axis, while quantity demanded is represented on X-axis on the graph. R.G Lipsey has defined demand curve as “the curve which shows the relationship between the price of a commodity and the amount of that commodity the consumer wishes to purchase is called Demand Curve.”

Demand curve can be of two types, namely, individual demand curve and market demand curve. Individual demand curve is the graphical representation of individual demand schedule, while market demand curve is the representation of market demand schedule.

Figure-3 shows the individual demand curve for the individual demand schedule (represented in Table-1):

In Figure-3 points a, b, c, d, and e demonstrates the relationship between price and quantity demanded at different price levels. By joining these points, we have obtained a curve, DD, which is termed as the individual demand curve. The slope of an individual demand curve is downward from left to right that indicates the inverse relationship of demand with price.

Let us understand the individual demand curve with the help of an example.

Prepare a demand curve for the individual demand schedule of product X.

The individual demand curve for the demand schedule of X (represented in Table-3) is shown in Figure-4:

In Figure-4, the DD curve represents the individual demand curve of product X.

Market demand curve can be obtained by adding market demand schedules. Figure-5 shows the market demand curve for the individual demand schedules (represented in Table-2):

The market demand curve also represents an inverse relationship between the quantity demanded and price of a product.

Let us understand the market demand curve with the help of an example.

Ram, Shyam, Sharad, and Ghanshyam are the four consumers of product P. The individual demand schedules for product P by the four consumers at different price levels is represented in Table-4:

Determine the market demand curve for product P and prepare a market demand curve for product P.

The market demand for product P can be determined by adding the individual demand schedules, as shown in Table-5:

The market demand curve for product P is shown in Figure-6:

In Figure-6, the DD curve represents the demand curve of product P.

Demand Function :

A function can be defined as a mathematical expression that states a relationship between two or more variables containing cause and effect relationship. Similarly, demand function refers to the relationship between the quantity demanded (dependent variable) and the determinants of demand for a product (independent variables). In other words, demand function states the influence of various factors of demand, such as price, customer’s income and habits, and standard of living, on the demand of a product.

In the short run, the demand function states the relationship between the aggregate demand of a product and the price of the product, while keeping other determinants of demand at constant.

In such a case, the demand function can be expressed as follows:

Dx = f (Px)

Where, Dx= dependent variable

Px = independent variable

It can be interpreted from the preceding equation that quantity demanded (Dx) is the function of price (Px) for product X. This states that if there is any change in the price of product X, then the demand of product X would also show changes. However, the demand function does not interpret the amount of change produced in demand due to change in the price of the commodity.

Therefore, to understand the quantitative relationship between demand and price of a commodity, we use the following equation:

Dx = a – b (Px)

Where a = constant (represents total demand at zero price)

b = ∆D/∆P (constant, which represents the change in Dx produced by Px)

On the other hand, in the long run, demand function shows a relationship between the aggregate demand of a product and a number of determinants of demand, such as price, consumer’s income, standard of living, and price of substitutes.

On the basis of time period, the demand function has been classified as follows:

i. Linear Demand Function:

Refers to the demand function in which the change in dependent variable remains constant for a unit change in the independent variable, regardless the level of the dependent variable. In the linear demand function, AD/AP is constant and the resultant demand curve is a straight line.

For example, if a=100 and b=5, then the demand function can be represented by the following equation:

Dx = 100 – 5 (Px)

With the help of the preceding equation, we can get the values of Dx by substituting the different values of Px, as shown in Table-6:

The linear demand function has been represented on graph (for Table-6) in Figure-7:

Price function can be obtained with the help of demand function by the following equation:

Px = a – Dx/ b

Px = a/b-(1 /b) Dx

Let us assume that a/b = a 1 and 1/b = b 1 , then the price function would be:

Px = a 1 – b 1 Dx

ii. Non-Linear Demand Function:

Refers to the demand function in which the dependent variable keeps changing with the change in the independent variable. In the non-linear demand function, the slope of the curve changes throughout the curve.

The equation for non-linear demand function is as follows:

Dx = a (Px) -b and

Dx = (a/Px + c)-b

Where, a or b or c >0

The non-linear demand curve is shown in Figure-8:

iii. Multivariate or Dynamic Demand Function:

Expresses a relationship between a dependent variable, such as demand, and more than one independent variable, such as price and income. In the long-run, individual or market demand cannot be derived by using only one variable because other determinants are not constant and they do affect the demand for a product. In addition, in long-run, demand for a product can be determined by the composite demand of all the determinants affecting the demand for a product.

The multivariate demand function can be expressed as follows:

Dx = f (Px, M, Py, Pc, T, A)

Where, Px = Price

M = Consumer’s income

Py = Price of substitutes

Pc = Price of complementary goods

T = Consumer’s taste

A= Advertisement expenditure

If the relationship between the demand and its determinants is a straight or linear line, then demand function can be expressed as follows:

Dx = a + b Px + cM + dPy + ePc + g T + jA

Where, a = constant and b, c, d, e, g, and j = coefficients of relation between demand and its determinants

XYZ Organization has launched product D at the price of Rs. 20 per unit. With the increasing demand of product D, its price has reached to Rs. 25. The change in demand for the product is noticed to be 10 per week. After that, the price continuously with the increase in demand at the same rate and has reached to Rs. 35.

Determine the following for product D (taking a = 100):

i. Demand Function Equation

ii. Demand Schedule

iii. Demand Curve

i. The demand function for product D can be expressed as follows:

D D = a – b (Pd)

Where, a = 20

Therefore, the demand function would be:

D D = 20 – 2 (P D )

ii. The demand schedule for product D is shown in Table-7:

iii. The demand curve for product D is shown in Figure-9:

Assumptions in Law of Demand :

The law of demand studies the change in demand with relation to change in price. In other words, the main assumption of law of demand is that it studies the effect of price on demand of a product, while keeping other determinants of demand at constant.

However there are certain assumptions underlying the law of demand, which are as follows:

i. Assumes that the consumer’s income remains same. If the income of an individual increases, the demand for products by him/her also increases, which is against the law of demand. Therefore, the income of consumer should not change.

ii. Assumes that the preferences of consumer remain same.

iii. Considers that the fashion does not show any changes, because if fashion changes, then people would not purchase the products that are out of fashion.

iv. Assumes that there would be no change in the age structure, size, and sex ratio of population. This is because if population size increases, then the number of buyers increases, which, in turn, affect the demand for a product directly.

v. Restricts the innovation and new varieties of products in the market, which can affect the demand for the existing product.

vi. Restricts changes in the distribution of income.

vii. Avoids any type of change fiscal policies of the government of a nation, which reduces the effect of taxation on the demand of product.

Apart from the aforementioned points, the law of demand assumes that the world is static and people consume products in the market at a fixed rate and price. These assumptions are not valid in the changing world.

Exception to Law of Demand :

Till now, we have studied that there is an inverse relationship between demand and price of a product. The universal law of demand states that the increase in the price of a product would decrease the demand for that product and vice versa.

However, there are certain exceptions that with a fall in price, the demand also falls and there is an increase in demand with increase in price. This situation is paradoxical in nature and regarded as exception to the law of demand. In simple words, exception to law o demand refers to conditions where the law of demand is not applicable. In case of exceptions, demand curve shows an upward slope and referred as exceptional demand curve.

Exceptional demand curve is shown in Figure-10:

In Figure-10, D represents the demand curve in which OP1 is the price, and OQ1 is the initial demand. When the price rises from OP1 to OP2, then the demand also rises from OQ1 to OQ2. This implies that if the price of a product increases its demand also increases, which constitutes an exception to law of demand.

Certain cases that are exceptions to the law of demand are as follows:

i. Giffen Paradox:

Refer to one of the major criticism of law of demand. Giffin Paradox was given by Sir Robert Giffen, who classified goods into two types, inferior goods and superior goods, generally called Giffen goods. The inferior goods are those whose demand decreases with increase in consumer’s income, such as cheap potatoes and vegetable ghee.

These goods are of low quality; therefore, the demand for these goods decreases with increase in consumer’s income. In addition, if the price of these goods increases, then the demand for these goods increases assuming that the high price good would be of good quality tor example, coffee is considered as superior and tea as inferior. In case tile price of both of these goods increases the consumers would increase the demand of tea to satisfy their need by paying tile same amount.

ii. Necessity Goods:

Refer to goods that are considered as essential for consumer. The demand of necessity goods does not increase or decrease with increase or decrease in their prices. For example, salt is a necessity good whose consumption cannot be increased in case its price decreases. In such a scenario, the law of demand is not applicable.

iii. Prestige Goods:

Refers to goods that are perceived as a status symbol, such as diamond and Johny Walker Scotch Whisky. The demand for these goods remains same in case of increase or decrease in their price. In such a case, the law of demand is not applicable.

iv. Speculation:

Refers to an assumption of consumers about the change in prices of a product in future. If the price of a product IS expected to rise in future, then the demand for the product increases in the present situation. However, this is against the law of demand.

v. Psychologically Bias Customers:

Refer to one of the important exceptions to the law of demand. Different customers have different perceptions about the price of a product. Some customers have perceptions that low price means bad quality of a particular product, which is not true in all cases. Therefore, if there is a fall in the price of a product, then the demand for that product decreases automatically.

vi. Brand Loyalty:

Refers to the preference of a consumer towards a particular brand. Consumers do not prefer to change a brand with increase in the price of that brand. For example, if a consumer prefers, to wear Levi’s jeans, he would continue to purchase it, irrespective of increase in its price. In such a situation, the law of demand cannot be applied.

vii. Emergency Situations:

Refers to a condition for which the law of demand is not applicable. In emergencies, such as war flood, earthquake, and famine, the availability of goods become scarce and uncertain. Therefore, in such situations, consumer.’ prefer to store a large quantity of goods, regardless of their prices.

Related Articles:

• Law of Supply: Schedule, Curve, Function, Assumptions and Exception
• Relationship between Demand Function and Demand Curve
• Notes on Market Demand Function and Market Demand Curve
• Demand Function and Demand Curve | Economics

What is Demand Schedule? Definition, Example, Graph, Types

• Post last modified: 6 April 2023
• Reading time: 23 mins read
• Post category: Economics

• What is Demand Schedule?

Demand schedule is a tabular representation of different quantities of commodities that consumers are willing to purchase at a specific price and time while other factors are constant.

Table of Content

• 1 What is Demand Schedule?
• 2 Demand Schedule Definition
• 3.1 Individual demand schedule
• 3.2 Market demand schedule
• 4 Demand Schedule Example
• 5 Business Economics Tutorial

Demand Schedule Definition

A full account of the demand, or perhaps we can say, the state of demand for any goods in a given market at a given time should state what the volume (weekly) of sales would be at each of a series of prices. Such an account, taking the form of a tabular statement, is known as a demand schedule. Benham

Also Read: What is Business Economics?

Types of Demand Schedule

Two types of demand schedule are:

• Individual Demand Schedule
• Market Demand Schedule

Individual demand schedule

Individual demand schedule : It is a tabular representation of quantities of a commodity demanded by an individual at a particular price and time, provided all other factors remain constant.

Market demand schedule

Market demand schedule : There is more than one consumer of a commodity in the market. Each consumer has his/her own individual demand schedule. If the quantities of all individual demand schedules are consolidated, it is called market demand schedule.

Also Read: What is Demand Function?

Demand Schedule Example

Let us understand the concept demand schedule with the help of a demand schedule example :

Assume that there are two individuals A and B in the market. They have a particular individual demand for Apple. The individual demand schedules for A and B and the consequent market demand are shown in Table

In Table, the individual demand schedule of A and B are depicted in the columns (2) and (3) at different price levels shown in column (1). Column (4) depicts the market demand schedule, which is the sum total of the individual demands of A and B. As shown in Table, at a price level of ₹80 per dozen of apple, individual demand by A and B are 2 dozens per week and 4 dozens per week respectively.

The market demand (assuming there are only two individuals in the market) is the sum total of individual demands i.e. 6 dozens a week.

The law of demand can also be represented graphically with the help of a Demand Curve .

Also Read: What is Supply Schedule?

• D N Dwivedi, Managerial Economics , 8th ed, Vikas Publishing House
• Petersen, Lewis & Jain, Managerial Economics , 4e, Pearson Education India
• Brigham, & Pappas, (1972). Managerial economics , 13ed. Hinsdale, Ill.: Dryden Press.
• Dean, J. (1951). Managerial economics (1st ed.). New York: Prentice-Hall.

Business Economics Tutorial

( Click on Topic to Read )

• What is Economics?

Scope of Economics

• Nature of Economics
• What is Business Economics?
• Micro vs Macro Economics
• Laws of Economics
• Economic Statics and Dynamics
• Gross National Product (GNP)
• What is Business Cycle?
• W hat is Inflation?
• What is Demand?
• Types of Demand
• Determinants of Demand 
• Law of Demand
• What is Demand Curve?
• What is Demand Function?
• Demand Curve Shifts
• What is Supply?
• Determinants of Supply
• Law of Supply
• What is Supply Schedule?
• What is Supply Curve?
• Supply Curve Shifts
• What is Market Equilibrium?

Consumer Demand Analysis

• Consumer Demand
• Utility in Economics
• Law of Diminishing Marginal Utility
• Cardinal and Ordinal Utility
• Indifference Curve
• Marginal Rate of Substitution
• Budget Line
• Consumer Equilibrium
• Revealed Preference Theory

Elasticity of Demand & Supply

• Elasticity of Demand
• Price Elasticity of Demand
• Types of Price Elasticity of Demand
• Factors Affecting Price Elasticity of Demand

Importance of Price Elasticity of Demand

• Income Elasticity of Demand
• Cross Elasticity of Demand
• Advertisement Elasticity of Demand
• Elasticity of Supply

Cost & Production Analysis

• Production in Economics
• Production Possibility Curve
• Production Function
• Types of Production Functions
• Production in the Short Run
• Law of Diminishing Returns
• Isoquant Curve
• Producer Equilibrium
• Returns to Scale

Cost and Revenue Analysis

• Types of Cost
• Short Run Cost
• Long Run Cost
• Economies and Diseconomies of Scale
• What is Revenue?

Market Structure

• Types of Market Structures
• Profit Maximization
• What is Market Power?
• Demand Forecasting
• Methods of Demand Forecasting
• Criteria for Good Demand Forecasting

Market Failure

• What Market Failure?
• Price Ceiling and Price Floor

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Did we miss something in Business Economics Tutorial? Come on! Tell us what you think about our article on What is Demand Schedule ? | Business Economics in the comments section.

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• Determinants of Demand

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Demand Schedule: Definition, Examples and Why It’s Important

Why are demand schedules important.

By collecting and analyzing data to forecast future demand for materials or goods based on their price, economists create demand schedules. These are some reasons why demand schedules are important:

What is a demand schedule?

A demand schedule is a table that depicts the connection between a product’s price and the volume of that product consumers buy. Customers decide how much or how many of a product to buy based on its price, which is known as the demand. Demand schedules typically show that demand decreases as a product’s price rises. This holds true for the opposite as well, as demand typically rises as a product’s price decreases.

A demand curve is created when the data from a demand schedule is plotted onto a graph. Usually, you plot the product’s price along the vertical axis and its quantity along the horizontal axis. The relationship between cost and demand can be visualized more clearly using a demand curve.

What’s included in a demand schedule?

All demand schedules include data on a product’s price and the quantity of that product that is most in demand. There are additional values that you can choose to include in a demand schedule even though these are always present. These are various components of demand schedules:

Demand schedule examples

Depending on who prepares them and the product they pertain to, demand schedules may take on different forms. Here are three examples of demand schedules:

Example One

Let’s say the cost of coffee beans increased by 54 cents per pound. 8%. Despite the sharp price increase, only 2 fewer pounds of coffee beans were bought overall. 13%. We can infer from this data that coffee beans are a relatively inelastic good.

The demand pattern for coffee beans over a nine-month period is as follows:

Month/YearPrice per poundQuantity (in pounds)01/211.268.00002/211.337.95003/211.347.95004/211.457.94505/211.557.89506/211.627.86507/211.837.84508/211.907.83509/211.957.830### Example two

Imagine someone looking for a water bottle and finding one they like for $10. They choose to purchase one for each member of their household due to the cost. They might decide to buy fewer water bottles as the price rises. For instance, once the cost reaches $20, they might decide to buy just one each for themselves and their spouse but not for their kids. They only purchase one when the cost reaches $25.

The manufacturer of water bottles could use this data to create a demand schedule that looks something like this to determine how much to charge for their bottles:

Price per water bottleNumber of bottles bought by household (by price per bottle)$104$153$202$251###

An airline prepares a demand schedule for their airline tickets. They separate the demand based on whether it is a domestic flight or an international flight, and they include the cost of the tickets. They can evaluate how changes in their prices affect both of their markets by setting up their demand schedule in this manner.

This is their demand schedule:

Price per ticketDomestic demandInternational demandTotal demand$5002017991,000$550594395989$600465409874$650637219856$700531276807$800497298 795

What do you mean by demand schedule?

A demand schedule in economics is a table that displays the quantity demanded of a good or service at various price points. On a graph, a demand schedule can be represented as a continuous demand curve with the Y axis showing price and the X axis showing quantity.

What is an example of demand schedule in economics?

A table displaying the quantity demanded at each price is known as a demand schedule. A graph of the quantity demanded at each price is called a demand curve. Because it is a graphical representation of the demand schedules, the demand curve is occasionally also referred to as a demand schedule.

How do you make a demand schedule?

A table or graph can be used to display an example from the gasoline market. A demand schedule is a table, such as Table 1, that displays the quantity demanded at each price. In this instance, cost is expressed as dollars per gasoline gallon.

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• Market Demand

The consumption of a good or service at different price levels can be depicted for a single consumer using the demand curve . But how do we depict the total consumption for that commodity from all consumers in the market? Read this lesson on Market demand that explains how to calculate and even graphically represent total market demand.

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Consumer’s demand.

In economics, ‘ demand ’ refers to the quantity of a good or service that consumers are willing and able to purchase at a given price. Different from what consumers desire to purchase, demand explains what they are actually able to purchase. Not all desires can be met for the reason that goods are guided by prices in the market. At higher prices, consumers would want to buy less of a good and the reverse is true for lower prices. This relation is the famous law of demand .

Another reason that desires are not the same as actual consumer decisions is that consumers are constrained by their budget . The money income of a consumer will limit his ability to purchase a commodity. Thus, demand expresses both willingness and ability to consume. Willingness is depicted by consumer preferences and ability is depicted by constraints such as money income and prices (budget constraint).

Browse more Topics under Theory Of Consumer Behaviour

• Consumer’s Budget
• Preferences of the Consumer
• Demand Curve and Law of Demand

Individual demand is the demand of a single consumer for a good or service at a given price, with other factors as money income, tastes, and preferences, prices of other goods constant. It can be graphically depicted by a downward sloping demand curve for a single consumer. The curve represents different price-quantity combinations available to a consumer to consume.

Market demand refers to the demand of all consumers of a good or service at a given price, with other factors as money income, tastes, and preferences, prices of other goods constant. It is called ‘ market ’ demand because it depicts the market situation for a good or service. It can be graphically obtained by aggregating the individuals’ consumer demand for a commodity. In simple words, the horizontal summation of all individual demand curves for a good or service gives you the market demand curve.

Market Demand Curve

The pre-requisite for drawing a market demand curve is that all individual demand curves must be known. It is simple to then draw the market demand curve form the market demand schedule . By summing the individual demands at different prices, we can get different price-quantity combinations for the market demand curve.

The law of demand holds for the market demand curve also i.e. it slopes downwards. If the market size is large, it is possible to take a small group of representative consumers and multiply their average quantities by the total number of consumers in the market to obtain the market demand for that good.

Graphical Representation of Market Demand Curve

(Source: Wikipedia)

In the graph above, we assume that there are only two consumers in a market for purposes of understanding. Let them be Person A and Person B. The individual demand curves for A and B can be drawn from their choice of consumption at different prices. The demand curves are drawn in blue and green for A and B respectively. Note that A demands nothing at prices above Rs. 3 so his demand curve coincides with the vertical axis. B demands some quantity at these prices but nothing at Rs. 6. At prices below and equal to Rs. 3, both consumers demand the good (here, bread).

The red curve depicts the market demand, obtained by horizontally summing A and B’s consumption preferences at different prices. For example, A and B demand nothing at Rs. 6 so the demand curve starts from the vertical intercept where price equals 6. At Rs. 5, A demands nothing but B demands 1 unit of bread, so the market demand becomes the sum of both, which is one unit only. Even at Rs.4, B demands something but A does not, so till Rs. 4, the market demand curve coincides with the demand curve of B.

At Rs. 3, A demands 1 unit and B demands 3 units, so the market demand becomes 4 units (by summing). This can be read from the curve at Rs. 3. Similarly, the graph can be read for other price levels. Thus, you can understand how the market demand curve is derived. If the individual demand schedules for consumers are given, you should now be able to sum quantities demanded at different prices and derive the market demand curve.

Solved Example for You

Question: Complete the table below to determine market demand

Solution: We know that Market demand is the horizontal summation of individual demands of a commodity at different prices. Therefore, here, we sum across the rows to obtain market demand for good X at each price.

We have horizontally summed over the quantities demanded by A, B, and C to obtain the required demand of the market.

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Theory of Consumer Behaviour

• Law of Demand and Demand Curve
• Consumer Budget

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