Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAPTER 2
Demand, Supply,
and Equilibrium:
An Overview
2.1 THE INDIVIDUAL’S DEMAND FOR A COMMODITY
The quantity of a commodity that an individual is willing to purchase over a specific time period is a function
of or depends on the price of the commodity, the person’s money income, the prices of other commodities,
and individual tastes. By varying the price of the commodity under consideration while keeping constant the
individual’s money income and tastes and the prices of other commodities (the assumption of ceteris
paribus), we get the individual’s demand schedule for the commodity. The graphic representation of the
individual’s demand schedule gives us that person’s demand curve.
EXAMPLE 1. Suppose that an individual’s demand function for commodity X is Qd x ¼ 8 2 P x ceteris paribus. By substituting
various prices of X into this demand function, we get the individual’s demand schedule shown in Table 2.1. The
individual’s demand schedule for commodity X shows the alternative quantities of commodity X that the person is willing to
purchase at various alternative prices for commodity X, while keeping everything else constant.
Table 2.1
P x ($) 8 7 6 5 4 3 2 1 0
Qd x 0 1 2 3 4 5 6 7 8
EXAMPLE 2. Plotting each pair of values as a point on a graph and joining the resulting points, we get the individual’s
demand curve for commodity X (which will be referred to as d x ) shown in Fig. 2-1. The demand curve in Fig. 2-1 shows that
at a particular point in time, if the price of X is $7, the individual is willing to purchase one unit of X over the period of time
specified. (The time period specified may be a week, a month, a year, or any other “relevant” length of time.) If the price of X
is $6, the individual is willing to purchase two units of X over the specified time period, and so on. Thus, the points on the
demand curve represent alternatives as seen by the individual at a particular point in time.
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