Do these 3 things before closing this tab:
1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesThe law of demand says that, all else equal, buyers generally want to purchase less of a good when its price rises and more of it when its price falls. Economists treat “demand” as a relationship between price and the quantity buyers are willing and able to buy, with every other relevant influence held constant.
What “demand” means in this model
In everyday speech, “demand” can mean strong interest in a product. In economics, demand is narrower. It describes how much of a good buyers are willing and able to purchase at each possible price, over a given period. A demand curve plots that relationship on a graph, with price on the vertical axis and quantity demanded on the horizontal axis.
The law of demand describes the slope of that relationship. Price and quantity demanded move in opposite directions. Higher price, lower quantity demanded. Lower price, higher quantity demanded. Introductory textbooks such as OpenStax’s Principles of Economics and Khan Academy’s lesson on demand both state the relationship in these terms.
Movement along the curve versus a shift of the curve
The most common source of confusion is the difference between a change in quantity demanded and a change in demand. They describe different things, and they show up differently on a graph.
Quick wins for a faster PC:
Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →#1 Best Overall
OpenStax, in Principles of Economics 2e, section 3.2, puts the distinction this way: “A change in the price of a good or service causes a movement along a specific demand curve, and it typically leads to some change in the quantity demanded, but it does not shift the demand curve.”
| What changed | Effect on the graph | Standard wording |
|---|---|---|
| The good’s own price | Move to a different point on the same demand curve | Change in quantity demanded |
| Income, tastes, population, prices of related goods, or expectations | The entire curve shifts right (increase in demand) or left (decrease in demand) | Change in demand |
Because a price change only slides the buyer along the existing curve, the phrase “a price increase reduced demand” is imprecise. The accurate version is that a price increase reduced the quantity demanded. Reserve “demand” for shifts caused by the other determinants.
Rank #2
What “all else equal” means
Economists use the Latin phrase ceteris paribus, meaning “other things being equal.” The law of demand isolates the link between one good’s price and the quantity bought by assuming that other economically relevant factors do not change while the price moves.
Real markets rarely change just one thing. When several influences move at once, analyze each one separately under the same assumption and then combine the effects. OpenStax gives a simple case: when a price rises and a buyer’s income falls at the same time, each change reduces the amount consumers buy, for two different reasons. The price rise produces a movement along the curve, while the income drop shifts the curve inward.
Factors that shift demand
The main non-price determinants of demand, as listed in OpenStax’s treatment, are income, tastes and preferences, the size or composition of the buyer population, prices of related goods, and expectations about the future. Each can change how much buyers want at every price.
Income: normal and inferior goods
For a normal good, higher income tends to increase demand, shifting the curve to the right. For an inferior good, higher income tends to reduce demand, shifting the curve to the left. Whether a good is normal or inferior depends on how buyers respond to rising incomes, not on the quality of the product itself. Whether an income change moves demand depends on which type of good is involved.
Rank #4
Substitutes
Substitutes are goods that can replace one another. OpenStax uses tablets and laptops as an example. When the price of a substitute falls, some buyers switch to it, which lowers demand for the original product. Lower demand here means the curve shifts left, even though the original product’s own price did not change.
Complements
Complements are goods used together. OpenStax uses golf clubs and golf balls. If the price of one complement rises, people buy fewer of it and therefore want less of the other, so demand for the second good falls.
Tastes, population, and expectations
More favorable preferences, a larger relevant population of buyers, or expectations of future price increases can all raise demand at each price. OpenStax illustrates expectations with people buying extra coffee when they expect its price to rise, pulling demand forward into the present.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A real-world example: chicken and beef
OpenStax reports figures from the U.S. Department of Agriculture (USDA) to show how changing tastes can shift demand. According to that reporting, per-person U.S. chicken consumption rose from 47 pounds per year in 1980 to 97 pounds per year in 2021, while beef consumption fell from 76 pounds to 59 pounds per person per year over the same period. These are USDA figures as cited by OpenStax in its 2022 edition; this article has not checked them against USDA’s underlying data series.
The example is useful because it illustrates a shift in preferences, not a price-driven movement. The figures do not show that prices alone caused the changes in consumption, and they should not be read as a test of the law of demand.
How to analyze a demand question step by step
- Identify which variable changed. If it is the good’s own price, the analysis concerns quantity demanded. If it is income, a related good’s price, tastes, population, or expectations, the analysis concerns demand.
- If the own price changed, move along the existing curve: a higher price means a lower quantity demanded, and a lower price means a higher quantity demanded.
- If a non-price factor changed, decide the direction of the shift. For income, check whether the good is normal or inferior. For a substitute, a lower price for the substitute shifts demand for the original good left. For a complement, a higher price for the complement shifts demand for the original good left.
- If more than one factor changed, analyze each under ceteris paribus first, then combine the effects on the graph.
Common mistakes to avoid
- Saying a price change “changed demand” when you mean it changed quantity demanded.
- Treating a substitute or complement as if it were the same good, or assuming a complement’s price moves demand in the same direction as the substitute’s.
- Calling a good “inferior” because it is cheap or low quality. In economics the label describes how demand responds to rising income.
- Reading a shift in consumption as proof of a price effect when the change came from tastes or other determinants.
The car prices and quantities used in textbook examples of the law of demand are illustrative. They are not current market data.
Recommended Free Tools
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
