8/6/11

Understanding the difference between demand and quantity demanded.


Not having a clear understanding of these two ideas gets a lot of students in trouble.  It is actually quite easy to distinguish the difference between the two but at first glance they sound very similar.  Basically by definition, “demand” is one certain curve represented on the price quantity graph.  It is the curve that we see, and when we have a change in demand, then we are moving the curve that is on the graph.  Also, when there is a change in the determinants of demand (ie. # of buyers, income, tastes and preferences, prices of related goods) then we will have change in demand because the actual demand curve is shifting.  An example of this is shown on the graph below:


In the graph we see the curve moving to the right, because this curve is changing position, we have a
change in demand.  Note that when looking at demand or change in demand we are not looking at equilibrium price or quantity, or worrying about the supply curve at all, we are only considering the position of the demand curve.  However, when we then look at quantity demanded, or change in quantity demanded, then we are concerned with equilibrium quantity because we are literally looking at the change that is happening along the Y axis.  An example of considering a change in quantity demanded is shown in the graph below:

note: it should say "change in quantity demanded" haha

Take note of the fact that the demand curve has not changed when we look at a change in quantity demanded.  The only thing that has changed is what quantity of the good is now being demanded by the individual.

To sum these ideas up, a change in demand is a shift of the curve.  Imagine demand actually changing.  But when we consider a change in quantity demanded the demand curve does not shift at all.  Instead the amount of quantity being demanded by the market has changed.  More often than not, this is caused by a shift in supply, an example of this is shown below:

 
Remember: A change in demand and a change in quantity demanded are not the same thing!  Generally, a change in demand will  result in a shift of the demand curve (demand itself is changing because of one of the determinants of demand).  While a change in quantity demanded will generally be the result of a change in supply, which causes us to move along the demand curve (not change it).  This change in quantity demanded will result in a change in quantity as shown on the X axis.  It is also possible that both a change in demand and a change in quantity demanded occur at the same time, but make sure you are able to separate the two.  An example of this case is shown to the right.


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