Question

Define "demand" and the Law of Demand. Why does the demand curve have a negative slope? Discuss these reasons with respect to why a demand curve for olives has a negative slope.

2.         Define, derive and illustrate graphically a market demand curve for olives with only three countries (Spain, Italy and Greece) demanding olives from the market.

3.         Discuss and illustrate graphically the difference between a change in quantity demanded and a change in demand.

Answer 1

QUESTION : Define "demand" and the Law of Demand. Why does the demand curve have a negative slope? Discuss these reasons with respect to why a demand curve for olives has a negative slope.

ANSWER : Demand can be defined as a desire to buy a good or service along with the willingness and ability to pay for that good or service. The fundamental principle in economics is the law of demand. The law of demand states that other things remaining constant ( ceteris paribus) when there is an increase in price of a commodity, the quantity of that particular good demanded will decrease and vice versa.

A demand curve shows the relationship between price of a good or service and the quantity demanded of that good and service at each level of price. The demand curve is negatively sloped from left to right. This is because price and quantity moves in opposite direction. That is when price increases quantity decreases and vice versa. This is the reason behind the negative sloped demand curve. The demand curve of olive has a negative slope because when price of olive increases the quantity demanded of olives fall and while its price decreases the quantity demanded will increase.