Demand and quantity demanded

One minor point: a lot of news coverage about energy economics confuses demand with quantity demanded. Demand is a function describing how much of a particular thing (say, oil) will be purchased at different prices. Because the quantity doesn’t change all that much when the price does, at least in the short term, this line is fairly steep when viewed on a graph using the y-axis to denote price and the x-axis to denote quantity. Quantity demanded, by contrast, is just one point on that line. At price X, people demand quantity Y. At price 2X, they demand a different quantity, based on the shape of the demand curve.

The most common error you see is statements like: “With prices at $4 a gallon, demand for gasoline has fallen” (it is the quantity demanded that has changed, in response to the change in price). An appropriate use of the term might be: “With the creation of an improved public transport system, demand for gasoline in Vancouver has fallen.” In the latter example, people demand a lower quantity of gasoline at all price levels, since a substitute for driving has become more appealing than before. In the transit example, the entire demand curve has shifted.

A more extensive explanation is available at Environmental Economics.

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here. View all posts by Milan