ECONOMIC CONCEPTS AND DEMAND CURVE

1.  Utility- Utility, in its broadest usage, is the general capability that things have of ministering to human well being. It expresses only a general or average impression that we have in reference to the relation of a class of goods to human wants.

2.  Goods- What are goods? Goods consist of all those things, the objective for the user which have a beneficial relation to human wants. They fall into several classes. We may first distinguish between free and economic goods. Free goods are things that exist in superfluity, that is, in quantities sufficient not only to gratify, but to satisfy all the wants that may depend on them. Economic goods are things so limited in quantity that all of the wants to which they could minister are not satisfied.

3.  Value- Value, in the narrow personal sense, may be defined as the importance attributed to a good by a man. The vagueness and inexactness of the word "utility," or the word "good," disappears when we reach the word "value." Value is in the closest relation with wants, and in this narrow sense depends on the individual's estimate. From the meeting and comparison of the estimates of individuals, raise market values or prices, which are the central object of study in economics.

Demand

What is demand? Demand is the relationship between the quantity of a good or service consumers will purchase and the price charged for that good.

The Economic glossary  defines demand as "the want or desire to possess a good or service with the necessary goods, services, or financial instruments necessary to make a legal transaction for those goods or services." Demand represents the entire relationship between quantity desired of a good and all possible prices charged for that good. The specific quantity desired for a good at a given price is known as the quantity demanded. Typically a time period is also given when describing quantity demanded.

Demand - Examples of Quantity Demanded:

When the price of an orange is 65 Rs the quantity demanded is 300 oranges a week.

If the local Starbucks lowers their price of a tall coffee from $1.75 to $1.65, the quantity demanded will rise from 45 coffees an hour to 48 coffees an hour.

 Demand Curves:

A demand curve is simply a demand schedule presented in graphical form. The standard presentation of a demand curve has price given on the Y-axis and quantity demanded on the X-axis.

     The Law of Demand:

The law of demand states that, the quantity demanded for a good rises as the price falls. In other words, the quantity demanded and price are inversely related. Demand curves are drawn as 'downward sloping' due to this inverse relationship between price and quantity demanded.

     Price Elasticity of Demand:

The price elasticity of demand represents how sensitive quantity demanded is to changes in price. Further information is given in the article Price Elasticity of Demand.

     

The demand curve graphically shows how many units of a good or service will be bought at each price. It plots the relationship between quantity and price that's been calculated on the demand schedule. That's a table that shows exactly how many units of a good or service will be purchased at various prices. 
As you can see in the chart, the price is on the vertical (y) axis and the quantity is on the horizontal (x) axis. This chart plots the conventional relationship between price and quantity -- the lower the price, the higher the quantity. As the price decreases from p0 to p1, the quantity increases from q0 to q1.

Elastic Demand

Elastic demand means that consumers are really sensitive to price changes. If the
price goes down just a little, they'll buy a lot more. If prices rise just a bit, they'll stop buying as much and wait for prices to return to normal. This relationship between price and the quantity bought is guided by the Law of Demand. If a good or service has elastic demand, that means that consumers will do a lot of comparison shopping. It also means they aren't desperate to have it, they don't need it every day, or there are a lot of other similar choices. 

     

Inelastic demand
Inelastic demand means that the quantity demanded by buyers doesn't change as much as the price does. This usually occurs with goods or services that people need every day. They've got to buy it, even if the price goes up. Similarly, they won't buy much more, even if the price drops. This relationship between price and the quantity bought is guided by the Law of Demand.