Example of The Demand Relation

As we have seen, economists think of the demand for a good or service as a relationship between the price of the good or service and the quantity demanded of that good or service. Common sense says that the relationship is an inverse one; that is, that an increase in price will result in a decrease in the quantity demanded. In this, common sense is absolutely right. The higher the price, the less quantity demanded, and conversely, the lower the price, the more quantity demanded.

Many economics textbooks use examples based on hypothetical (made-up) numbers. There is nothing wrong with that and we shall use some of them later on. But why not use a real example? Several years ago, the author estimated the demand relationship for beer. Here is an example based on that estimate. The prices quoted are wholesale prices, in cents of 1972 purchasing power. Quantity demanded is measured in millions of gallons, for the United States as a whole.

Demand Schedule
Beer, 1960

price,
cents/gal. 		Quantity
demanded,
millions
of gals.


50 4899.27
60 4355.67
70 3812.07
80 3268.47
90 2724.87
100 2181.27
110 1637.67
120 1094.07

Diagram

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