In this section, we present the law of demand as a schedule.
After you have worked through this section of the learning unit, you should be able to:
- interpret the demand schedule and use a demand schedule to explain the law of demand
To demonstrate the law of demand by means of a schedule, we use the demand for fried chicken pieces by a household (individual demand) as an example.
From the description of the law of demand, we know that if the price of fried chicken pieces increases, the quantity of pieces demanded will decrease, and if the price of fried chicken pieces decreases, the quantity of pieces demanded will increase.
Watch the following video clip to see how the demand schedule for fried chicken pieces is constructed:
The table below is a hypothetical demand schedule for fried chicken pieces by a household comprising three students.
Column 2 shows different prices for fried chicken pieces.
Column 3 shows the quantity of fried chicken pieces that will be demanded at each price during a particular week.
Table 1 Individual demand for fried chicken pieces
| Combination | Price of fried chicken per piece (rand) | Quantity of fried chicken pieces demanded (per week) |
|---|---|---|
| A | 7 | 2 |
| B | 6 | 4 |
| C | 5 | 6 |
| D | 4 | 8 |
| E | 3 | 10 |
| F | 2 | 12 |
| G | 1 | 14 |
According to this table – given that all the other factors that influence demand remain the same – at a price of R7 per fried chicken piece, the quantity demanded will be two pieces. If the price of fried chicken pieces decreases to R6, the quantity demanded will be four pieces; at a price of R5, the quantity demanded will be six pieces, and so on.
Can you see how the quantity demanded increases as the price of a fried chicken piece decreases? And how the quantity demanded decreases as the price increases?
Note how the information in the table is based on the buyers’ intentions. In other words, they are asked how much they plan or intend to purchase at different prices.
Do the following activity to see if you can interpret a demand schedule:
You are given the following demand schedule for a good or service:
| Price per kg | Quantity |
|---|---|
| R50 | 500 |
| R40 | 400 |
| R30 | 300 |
| R20 | 200 |
| R10 | 100 |
Does this reflect the law of demand?
It it does not reflect the law of demand because it indicates that as the price decreases, the quantity demanded decreases as well.
You got it.
It does not reflect the law of demand. The law of demand states that a lower price leads to a higher quantity demanded, and a higher price leads to a lower quantity demanded, ceteris paribus. The data shows that as the price decreases, the quantity demanded decreases as well.
The following table indicates the demand for a good or service:
| Price per kg | Quantity |
|---|---|
| R50 | 100 |
| R40 | 200 |
| R30 | 300 |
| R20 | 400 |
| R10 | 500 |
- What is the quantity demanded at a price of R50? It is ______ kg.
- What is the quantity demanded at a price of R20? It is _____ kg.
- The quantity demanded (increases, decreases) as the price declines from R40 to R20.
- By how much does the quantity demanded change if the price changes from R40 to R20?
It changes by ______ kg. - What happens to the quantity demanded if the price increases from R20 to R50?
It decreases by _______ kg.
- What is the quantity demanded at a price of R50? It is 100 kg.
- What is the quantity demanded at a price of R20? It is 400 kg.
- The quantity demanded increases as the price declines from R40 to R20.
- By how much does the quantity demanded change if the price changes from R40 to R20?
It changes by 200 kg. - What happens to the quantity demanded if the price increases from R20 to R50?
It decreases by 300 kg.