In economics, the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together.

Demand curves are used to estimate behaviors in competitive markets, and are often combined with supply curves to estimate the equilibrium price (the price at which all sellers are able to find a willing buyer, also known as market clearing price) and the equilibrium quantity (the amount of that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market.Krugman, Paul, and Wells, Robin. Microeconomics. Worth Publishers, New York. 2005.

Characteristics

The demand curve usually slopes downwards from left to right; that is, it has a negative association (for two theoretic exceptions, see Veblen good and Giffen good). The negative slope is often referred to as the "law of demand," which means that when all things but price are held equal, if the price of the good/service increases, the less of that good/service will be purchased by consumers; see also price elasticity of demand. The demand curve is related to the marginal utility curve, since the price one is willing to pay depends on the utility. However, the demand directly depends on the income of an individual while the utility does not. Thus it may change indirectly due to change in demand of other commodities. These individual factors come together to determine the budget constraint and indifference curve of consumers. The demand curve is then generated by connecting the points where those lines are tangent to one another.

If the price a consumer is willing to pay for an additional unit of a good increases initially as function of amount (see examples) then the maximum price p_max he is willing to pay is more than the price he would be willing to pay for the first unit. At this price p_max there is a non-zero amount A for which the consumer surplus is zero; at this price and amount the negative consumer surplus for the first units is compensated by the more attractive later units, for each of which the consumer would be willing to pay more than p_max. At this amount the price he is willing to pay for an additional unit has decreased back to p_max. If the price is lower than p_max the consumer will buy more. Thus he buys either nothing or at least A. In this case the individual demand curve has a discontinuity, where, after decreasing with price as usual, the demand jumps to zero. At this price he is indifferent between buying this minimum amount and buying nothing (spending the money on something else). Geometrically p_max is the slope of the steepest line through the origin and another point of the graph of the total price the consumer is willing to pay as function of amount. In the case of a smooth function this line is tangent to the graph.