Demand Curve definition

Demand curve shows the quantity demanded at each price. It is based on law of demand which state there is inverse relationship between price of a good and its demand, provided we hold everything else that affect  demand like individual preference constant.

We all have experienced the law of demand in our life. Most common of them is changing oil prices. One thing or other happens in Middle East like Islamic State capturing of Iraq, rebellion in Qatar against oppressive government. All this affect oil supply worldwide as Middle East has major reserve of world oil. Since the demand of oil is inelastic price rises as supply falls

When we combine the demand curve of all individuals for a particular good say Maggie noodles we get an aggregate demand curve which we call market demand curve.

Why is demand curve downward sloping?

Let's understand this with an example. Narendra Modi like Maggie noodles very much. ( a word of warning noodles are harmful for health!). Eat less of them).  Below we draw Modi’s demand schedule which shows quantity demand of the noodles as its price changes.

Demand schedule


Taking price on y axis and quantity of noodles demanded on x axis and mapping the above data on graph we obtain the demand curve.

Demand curve : Look demand curve is downward sloping

Demand curve is downward sloping because as seen in graph lower price increases the demand for good and vice versa.

Demand curve need not to be always downward sloping. It can vertical or horizontal depending upon the elasticity of good . For example demand curve for drug addicts is inelastic even if the price of drugs increases the quantity demanded of drugs will remain same.

 

Largest Economies in the world 2015

World’s largest economy is U.S.A followed  by China . Other largest economies include Japan, Germany , U.k , France and India. This is present world order. But if you look by growth rate India is the moving faster than all with annual  growth rate of 7.5% followed by Qatar. China once the fastest growing economy has slowed down and is growing at  6+ growth rate.  ¹.  

It's a tough task

Finding largest economy is a hard task and at best a approximation. The most commonly used criteria is nominal GDP . But it is filled with many problems. Major problem with nominal GDP approach is that it does not take into  account  the cost of living in different countries. Mere fluctuation in exchange rate can change the ranking of different economies.  There is another method of ranking which uses Purchasing Power Parity basis(PPP). It gave different ranking order. Ranking based on Nominal GDP and GDP at PPP is given below for top 10 largest economies

Ranking of largest economies based on nominal GDP and GDP at PPP

GDP in terms of PPP takes into account the cost of living in different countries therefore it    is much better indicator of average living standard. 

Some Interesting facts

1. Nominal GDP of top ten economies adds up to 65% of world economies. 

2. Total of 172 countries constitute only 25 percent of world's economy.

3. When measured in terms of nominal GDP U.S. A is the largest economy valued at $             17.41 trillion. But if you uses measure GDP at  Purchasing  power parity (PPP) U.S.A            loses its number one spot and is replaced by China.

4. Interestingly India based on nominal GDP ranks at tenth while it rank third in terms of           purchasing power parity.

Conclusion

 Global economic order is changing very fast. New opportunities are emerging. Only those economies  that will able to seize these opportunities will rise and be next superpower.