to one of the entries in the table. The curve that connects these points is a demand curve. A demand curve is a graphical representation of the demand schedule, another way of showing the relationship between the quantity demanded and price. Note that the demand curve shown in Figure 3-1 slopes downward. This reflects the general proposition that a higher price reduces the quantity demanded. For example, jeans-makers know that they will sell fewer pairs when the price of a pair of jeans is higher, reflecting a $2 price for a pound of cotton, compared to the number they will sell when the price of a pair is lower, reflecting a price of only $1 for a pound of cotton. Similarly, someone who buys a pair of cotton jeans when its price is relatively low will switch to synthetic or linen when the price of cotton jeans is relatively high. So in the real world, demand curves almost always do slope downward. (The exceptions are so rare that for practical purposes we can ignore them.) Generally, the proposition that a higher price for a good, other things equal, leads people to demand a smaller quantity of that good is so reliable that economists are willing to call it a “law”—the law of demand.
Shifts of the Demand Curve Although cotton prices in 2010 were higher than they had been in 2007, total world consumption of cotton was higher in 2010. How can we reconcile this fact with the law of demand, which says that a higher price reduces the quantity demanded, other things equal? The answer lies in the crucial phrase other things equal. In this case, other things weren’t equal: the world had changed between 2007 and 2010, in ways that increased the quantity of cotton demanded at any given price. For one thing, the world’s population, and therefore the number of potential cotton clothing wearers, increased. In addition, the growing popularity of cotton clothing, as well as higher incomes in countries like China that allowed people to buy more clothing than before, led to an increase in the quantity of cotton demanded at any given price. Figure 3-2 illustrates this phenomenon using the
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