The concept of curve can refer to a line that enables the development of the graphic representation of a magnitude according to the values that one of its variables is taking. In the field of economics, on the other hand, the idea of demand is linked to the quality and quantity of services and goods that can be purchased by consumers in the market.
The demand curve, in this framework, is the line that plots the mathematical link between the maximum amount of a certain good that a consumer would be willing to purchase and its price. This relationship is based on various assumptions, such as the infinite divisibility of commodities and the perfect rationality of consumers.
These last two assumptions, together with others on which both the demand curve and its properties depend, have drawn negative criticism since their inception. Despite this, even with the limitations that may arise from these abstractions, this curve is really useful to understand the behavior of the markets from a qualitative point of view, and may prove to be an adequate description empirically.
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Beyond being a theoretical construction, the demand curve is used for market analysis, usually in conjunction with the so-called supply curve (determined by the quantity of a product that a company is willing to sell at a certain price). price). The point where the demand curve intersects the supply curve marks market equilibrium.
Both curves represent an analysis tool of great importance in the field of neoclassical economics to predict the price trend. Neoclassical economics is a concept used to refer to an approach that seeks to integrate certain insights from classical to marginalist analysis, a school of thought that emerged in the mid-1800s.
To draw the demand curve, only the price of the good in question is taken into account. The rest of the variables, such as the price of other goods and the income of the consumer, were considered constant. In this way, the demand curve reveals the changes in quantity demanded as a function of price.
Generally, the higher the price, the lower the demand : this is why the demand curve usually has a downward path. This situation could change if other variables were taken into account, such as the perspective on the future price, the increase in the population that demands the good, changes in wages and changes in preferences.
Speaking in purely mathematical terms, the demand curve of a market or a consumer who owns a quantity n of products or goods is a hypersurface with dimension n in a space that is defined as R to the power of 2n+1. It is known as a hypersurface, in the field of mathematics, to an n – dimensional manifold, where n is greater than 2; in other words, it is a geometric object created to generalize a surface from two dimensions to more, just as it happens with the hyperplane and the notion of plane.
If the demand curve moves to the right, it represents an increase in demand that occurs because a factor other than price has changed; if the displacement takes place to the left, on the other hand, it means that the demand has decreased, due to a variation that does not involve the price either.
Among the possible causes of these displacements are the changes in the perspectives of future prices, the growth of the population that demands the good in question and the variations in the preferences of potential consumers.