We've just looked at the relationship between price and quantity demanded illustrated in table form. Now it's time to look at this, most fundamental concept illustrated as a graph it's called the demand curve and is one of the cornerstones of all economics. Remember, though all of this is common sense, you probably understand some of this law of demand already it simply states.
If the price of a good increases, the quantity demanded decreases like the table, this graph will curve will help us uncover. More of the secrets behind this law think of it as a tool to help you visualize what's happening around, you're going to use the information in the table to draw a demand curve showing the negative or inverse relationship between the price of fried chicken and the quantity demanded over the period of a week. Now, I suggest that you're out there watching this DVD get yourself a piece of paper ruler, a pencil and do this following exercise with us.
The first step is to draw the axes and indicate the. Origin 0, the second step is to decide which variables are to be plotted on the axis since we're interested in the relationship between price and quantity demanded will plot the price values P on the vertical axis and the quantity demanded CD on the horizontal axis. The next step is to indicate the price and quantity demanded intervals on each axis from the table. We can see that there are seven different sets of figures. And so we indicate 7 equally spaced intervals on our axes. So that's 1 2, 3, 4 5,.6 and 7 intervals and the same again for the horizontal axis. Now we plot the corresponding price in quantity of demanded values, we'll, start with the price values moving up from the origin.
Our first value is one round, followed by two round, three round, four round, five round, six round, of course, seven round and I do the same for the quantity demanded values would start with a quantity 2 + 4 6, 8 10, 12 and 14. Now we can plot points that show the different price to quantity demanded combinations. According to the table, our first combination says that the price of seven rats the quantity demanded is two pieces of fried chicken.
This combination then is represented by this point on the diagram. And we can similarly plot the rest of the combinations when we join all the points to form a curve and label it D. At each end, we have created our first demand curve.