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What is a demand curve?

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Quick Answer

A demand curve is a graphical representation of the demand of a product based on its price. Demand curves are downward sloping, demonstrating the law of demand that states that the quantity of a product or service demanded moves in the opposite direction of its price.

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Full Answer

A demand curve is made by first creating a demand table. The demand table is a list of the amount demanded at various price points. This table is then plotted out on a graph, with the x-axis representing the quantity demanded and the y-axis the price. When it is shown as a curve, the viewer sees that as the price lowers, the demand for a product or service rises, as long as all other variables remain constant.

Price is not the only thing that affects the demand curve, however. Other variables can cause the curve to shift to the right or the left. These variables include changes in customer preferences, levels of income, prices of other goods that are related to the one displayed by the curve, and the size of the available market. A shift in the demand curve means that the demand rises or lowers at the same price levels as before, with the curve retaining the same slope as before.

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