Graphing a Demand Curve from a Demand Schedule, and How to Read a Demand Graph

In this video, we're going to
dive deeper into the demand curve

by building one together

and then learning two different
ways to read a demand curve.

So let's start with the
definition of a demand curve.

A demand curve is a function

that shows the quantity demanded
at different market prices.

That's a bit mysterious,
so let's take an example

of the market for oil, and then
build a demand curve together.

Here's a hypothetical table of data
that shows the amount of oil bought

at different market prices.

Suppose that at a price of
fifty five dollars per barrel,

the quantity of oil demanded would
be five million barrels a day.

At a lower price, say
twenty dollars per barrel,

the quantity of oil demanded
is going to be higher,

say twenty five million barrels a day.

And at an even lower price,
five dollars per barrel,

the quantity of oil demanded would
be fifty million barrels a day.

Let's convert these into a graph with
the price of oil on the vertical axis

and the quantity of oil
demanded on the horizontal axis.

We can now graph our three points.

And connect them with a line.
That's the demand curve for oil.

It shows us the quantity
demanded at each price.

Immediately, we see a key
feature of the demand curve,

which is that it slopes downward.

At a lower price, the quantity demanded
is greater. That makes intuitive sense.

If the price is lower, you'll buy more.

Now let's discuss the two
ways to read a demand curve.

We'll start with the horizontal method.

We begin by reading the price,
say fifty five dollars per barrel,

then read horizontally
over to the demand curve,

and then down to find that at that price,

buyers are willing and able to purchase
five million barrels of oil per day.

At a price of twenty dollars per barrel,

buyers are willing and able to purchase
twenty five million barrels of oil.

At a price of five dollars per barrel,

buyers are willing and able to
purchase fifty million barrels of oil.

The second way of reading the
demand curve, the vertical method,

begins at the bottom and works its way up.

It tells us the value

or the maximum price that buyers are willing
to pay for a particular barrel of oil.

We pick a quantity along the x axis,

say, the five millionth barrel of oil,

and then read up to find the value of
that barrel of oil, or in other words,

the maximum amount that buyers are
willing to pay for that barrel,

which is fifty five dollars.

How about the twenty five
millionth barrel of oil?

We can read up from the horizontal axis

and then over to see that the maximum

buyers are willing to pay is twenty
dollars for that barrel of oil.

Both ways of reading the
demand curve are useful

for solving different kinds of problems.

The horizontal reading tells us the
quantity demanded at a given price.

The vertical method tells us how much
buyers value a particular barrel of oil.

The demand curve is a
fundamental tool in economics,

so please be sure to practice building it
and reading it until you've mastered it.

If you're

a teacher, you should check out our supply
and demand unit plan that incorporates

this video. If you're a learner,

make sure this video sticks by answering
a few quick practice questions.

Or if you're ready for more
microeconomics, click for the next video.