If I recall Eco 101, falling prices do nothing to the demand curve. The demand curve indicates what volume of sales will occur over a range of prices.

Lower prices generally mean that a greater volume of products will be purchased, but doesn't move the curve at all.

PawPaw,

I respectfully disagree. How is a "greater volume of products" purchased if the demand doesn't increase?

Also that is one of the problems with socialized medicine. By reducing a persons perceived price to zero, demand spikes. People have no reason not to go to the doctor. That's why government programs always end up costing more than projected.

PawPaw,

To be clear, I never said the curve moves. The demand curve itself is a function of price to quantity. As the price declines, the volume increases.

In my book, increased volume is the same as increased demand. The terms are interchangeable.

Ravenwood. Demand is a curve that accounts for differing quantities demanded at various prices. For example, if the price of widgets is 100.00, you can sell 100 of them, but if the price of widgets is 75.00, you can sell 125 of them. If the price of widgets is 50.00 you can sell 150 of them. You plot the points and that's your demand curve. Some curves are elastic, some are inelastic. Once you plot all the points, that is your demand curve and it will remain constant until something changes in the economy. Under our hypothetical demand curve where you can sell 100 widgets for 100.00, etc, if the market analyists discover that they can still sell 100 widgets at 100.00, then the demand has increased.

Where supply equals demand, you have equilibrium. For demand to change, the curve has to change. To an economist, the terms are not interchangeable. Increased demand is totally different from quantity demanded.

Of course, this little discussion is strictly and I understand where you're coming from. I'd buy a bunch of houses at 100K, but none at 250K.

Go to wikipedia for a short illustration.

http://en.wikipedia.org/wiki/Demand

"Increased demand is totally different from quantity demanded."

Um, yeah okay. So you are telling me that instead of saying "lower prices actually stimulated demand" I should have wrote "lower prices actually stimulated the quantity demanded"?

Hate to be rude, but it seems to me like you're being overly critical.

No, sir, I wasn't trying to be argumentative, nor was I trying to be overly nit-picking.

My point is that the demand curve predicts that when prices fall, rational buyers will buy more of the product. The demand doesn't change, it was always there. That's Eco 101.

By the way, I read your blog three or four times per week. Good job. Keep writing.

Thanks.