I understand the theories of supply and demand. I can’t figure out, however, why demand has a negative slope. If demand is lower when prices are higher and quantity is lower, then why is that the highest point in the demand curve? Likewise, if demand is highest when prices are low and quantity is high, why is that the lowest point on the demand curve?
In: Economics
Think of the points on the demand curve as an answer to this question: “How many units would be demanded at each individual price?”
Different people are willing to pay a different price for the same good. Some people have a lot of money, or they really like a good, so they would be willing to buy it for a high price. For example, there is somewhere out there that would pay $10 for a can of a soft drink. Those “high paying people” are the points over on the “top” of the demand curve, where the price is high, and the corresponding quantity is low. “At a high price, only few customers are willing and able to purchase the good”.
But as the price slowly decreases (and you “move along” the demand curve from top to bottom), more and more interested buyers appear, until all possible interested buyers show up when the price eventually hits 0.
Also, as you’re looking at the demand curve, one curve, there is no “highest demand” and “lowest demand”. There are high points on the curve, there are low points on the curve, but the demand is that one, whole line. Demand can increase if the whole curve shifts to the right, or decrease if it shifts to the left.
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