Law of demand | Supply, demand, and market equilibrium | Microeconomics | Khan Academy

The video introduces the law of demand, a core microeconomics concept, stating that raising the price of a product lowers the quantity demanded, and lowering the price increases the quantity demanded. It emphasizes that demand refers to the entire relationship between price and quantity demanded, not just a specific quantity.

A crucial distinction is made between 'demand' and 'quantity demanded'. 'Quantity demanded' refers to the specific amount at a given price, while 'demand' represents the entire relationship or schedule between price and quantity demanded. The video sets the stage to clarify this difference, noting that this video focuses on how quantity demanded changes with price, while future videos will explore how demand shifts.

To concretize the law of demand, the presenter uses an example of pricing an ebook, 'Space Whatever'. A demand schedule is introduced as a table showing the relationship between different prices and the corresponding quantities demanded (e.g., $2 for 60,000 downloads, $4 for 40,000 downloads, etc.). This table visually demonstrates the inverse relationship.

The data from the demand schedule is then used to plot a demand curve. The video notes a common economic convention of placing price on the vertical axis and quantity demanded on the horizontal axis, despite the presenter's personal preference. The points from the demand schedule are plotted, and a continuous curve is drawn to represent demand at all possible price points.

The video reiterates the distinction: 'quantity demanded' is a specific point on the curve (how many units are wanted at a given price), while 'demand' is the entire curve or schedule (the whole relationship). It explains that a change in price, with all else being equal, causes a movement along the existing demand curve (a change in quantity demanded), not a shift of the entire curve (a change in demand).