Let's say Chad has a few pairs of white sneakers. Chad has a pair of Conserves for the gym, a pair of Air Force 1s that he likes to keep clean, and some white Adidas he wears to the bars and gets dirty.
If all white sneakers were $10 dollars, how many pairs of shoes would Chad buy? My guess is Chad would not mind buying 5 pairs. If white sneakers were $150 per pair he would probably not buy more than 2 pairs. If white sneakers were $200 he would only buy a pair.
There is clearly a relationship between the price of white sneakers and how many Chad buys.
We can create a Demand Schedule which shows the relationship between the price and the quantity demanded.
|Price of White Sneakers ($)||Quantity Demanded|
On our Y-axis is price. This price is the price of one unit of the good or service. On our X-axis is Quantity Demanded. This is the different quantities of white sneakers Chad could potentially want.
Using our Demand Schedule lets plot each point!
This results in the following linear relationship!
Notice how the Demand curve is downward sloping. This shows a very key economic concept: Law of Demand!
The Law of Demand states that holding everything constant, when the price of a product falls, the quantity demanded increases.