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demand curve A demand curve is a function that shows the quantity demanded at different prices.

In summary, a supply curve is a function that shows the quantity that suppliers would be willing and able to sell at different prices. The higher the price, the greater the quantity supplied—this is often called the “law of supply.”

supply curve The supply curve is a function that shows the quantity supplied at different prices.

Durables: In this case the demand curve s reflect a yes-no decision of each individual customer. People buy one washing machine, one smartphone, one camera, or one PC. Or they don’t buy at all. The demand curve is the sum of the individual decisions. Nondurables: In this case, buyers often buy several units at a time, depending on the price. Think

There are few substitutes for oil in its major use, transportation, so when the price increases by a lot, the quantity demanded falls by only a little. Thus, the demand curve for oil is not very elastic and would be best represented by demand curve I.

The fact that oil is not equally valuable in all of its uses explains why the demand curve for oil has a negative slope. When the price of oil is high, consumers will choose to use oil only in its most valuable uses (e.g., gasoline and jet fuel). As the price of oil falls, consumers will choose to also use oil in its less and less valued uses

Thus, when the demand curve is inelastic, revenues go up when the price goes up and, of course, revenues will go down when the price goes down.

What happens to seller revenues when the demand curve is inelastic and the price rises? (Review Figure 5.3 if you don’t know immediately.) When the demand curve is inelastic, an increase in price increases seller revenues. In Figure 5.5, the blue rectangle is seller revenues at the no prohibition price; the much larger green rectangle is seller