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2.1 The Demand Curve

The typical demand curveA linear mathematical formula with quantity or price as the dependent variable. has the price on the y-axis and the quantity demanded on the x-axis and is downward-sloping. A demand curve can be represented as a linear mathematical formula with quantity or price as the dependent variable. A demand curve is a very useful diagram for describing the relationship between the price level and the quantity demanded at each price level. In general, as the price of a product increases, the demand for the good decreases. Similarly, as the price of a product decreases, the demand for the good increases. The next section of the chapter discusses how the demand curve can be used to identify the optimal price and quantity for selling just one version of a product.