Sunday, June 01, 2008

Demand vs Quantity Demanded

When talking about Demand and Supply it is important to differentiate between the terms Demand (or Supply) and Quantity Demanded (or Quantity Supplied). While they sound the same, they are not interchangeable.

When we use the term Demand we are referring to changes in the entire demand curve. While when we refer to Quantity Demanded we are referring to a movement along the demand curve.

Remember the Law of Demand states that certis pariubs (economic speak for other things being equal) a change in price will result in quantity demanded changing in the opposite direction. Or as your book (Economics Today, The Micro View, and the Macro View, 14th Edition, by Roger LeRoy Miller, 2008, Pearson Education, Inc) in Chapter 3, page 52 states:

When the price of a good goes up, people buy less of it, other things being equal. When the price of a good goes down people buy more of it, other things being equal.

The Law of Demand deals exclusively with changes in price and quantity and, because of this, when we are describing changes under the Law of Demand we have to prefix the word Demand with the word Quantity. Thus, we refer to a change in Quantity Demanded rather than a change in Demand which refers to some other factor (income, tastes, changes in compliments and substitutes, etc.) changing.

While some will dismiss this as merely an exercise in semantics, it is important and will lead to problems in both understanding what is going on with demand and supply as well as lead to wrong answers on tests.


Anonymous said...

This was very helpful for a problem on my study guide, got an exam tomorrow so I best be prepared. Thanks!

Anonymous said...

I saw that someone put that comment on today at 8pm, im sure they are studying for the same Econ 200 exam that I am studying for right now. Thanks for the help and best of luck Anonymous!

Anonymous said...

this was the best. thnx so much

mconstas said...

Good to see that even 4 years later this question is still relevant when taking Econ 200, I have an exam today at 6:30 and this helped me to understand the differentiation between the two. Thanks!

Anonymous said...

This helped me so much thank you! I have a quiz later today and I didn't understand this point until I read your piece. I really appreciate it.