A Demand Curve is simply the visual representation of the relationship between a product’s price and the quantity demanded by the market.  For most, if not all, products this an inverse relationship with higher prices resulting in lower overall sales, and vice versa.  The following diagram represents a typical Demand Curve.

First note that the Demand Curve is often drawn as a straight line.  In some contexts, it does matter.  But for our purposes feel free to draw it as a straight line and to refer to it as either the Demand Curve or the Demand Line.  Also, in our diagram, we’ve put product price on the vertical axis and the resulting sales on the horizontal axis.  Typically, the independent variable is on the horizontal and the dependent on the vertical.  But there is a reason for drawing it this way that goes beyond this explanation.  And there is no harm done, so go with it.

Referring to the diagram you can see that when product price is high, the resulting “quantity demanded” is low.  And when the price is low, quantity demanded is high.  There are two ways to rationalize this relationship.  The first and more formal is to refer to the “income” and “substitution” effects.  When the price of a product increases, for example an increase in the price of gasoline, this adversely impacts consumers’ budgets.  And so, they will have to decrease their overall spending.  This decrease may also include the product in question.  Higher gasoline prices might sufficiently harm some people’s budget enough to cause them to forgo a weekend car trip.  The substitution effect focuses on the substitution of a relatively less expensive good for the now more expensive good.  An increase in the price of coffee may cause some consumers to forgo coffee and to drink soda or tea instead.

The other explanation for the downward sloping Demand Curve deals with reservation prices.  A reservation price is simply the maximum amount a given consumer is willing to pay for a certain product at a given moment.  For example, you may be quite willing to pay $50 to see Bob Dylan in concert, but $150 is too much.  That price where your decision changes is your reservation price.  Since each of us likely has a different reservation price for a Dylan concert, it makes sense that at a relatively low price many of us will choose to buy the tickets.  But as ticket prices increase, they will exceed more and more people’s reservation price resulting in lower overall quantity demanded.

But there are so many things that impact demand other than just price.  We need to see how to incorporate other changes into our model.  For example, what is the impact of Elon Musk’s notoriety and that of Tesla on the overall market for alternative fuel vehicles?  Point A on the following diagram represents a particular price-sales combination for alternative fuel vehicles before Musk and Tesla started commanding so many headlines.  Point B represents the impact on sales of alternative fuel vehicles given the growing popularity of Musk and Tesla.  At any given price, quantity demanded has increased.  We represent this with a rightward shift of the demand curve.

When something other than price results in a change in quantity demanded, we refer to this as a “change in demand” (versus a change in “quantity demanded”).  Changes in demand can be both positive, as in our example above, or negative.  For example, a series of fuel tank eruptions in the Ford Pinto in the 1970s led to a substantial decrease in demand for the Ford Pinto.  We would represent that with a leftward shift in the demand curve.  At any given price, fewer customers desired to purchase one.

And so, beyond changes in product price, many things can cause either an increase or decrease in product demand.  The following is a generic list of factors that might lead to a shift in demand.  But largely you can rely on your own judgement to determine whether something would affect consumers’ desire to purchase a product (again, beyond a change in price) and how.

• Customer Taste – “Taste” is an umbrella term for anything that might make a particular product or service more or less desirable to customers.  In our example, the largely positive press Musk and Tesla have received may have positively impacted consumers’ taste for alternative fuel vehicles in general.  Or, a concert tour by a performer, like Dylan, may increase the desirability of his albums.  But then changes in taste can also be negative.  Covid-19 substantially decreased consumers’ “taste” for eating out, travelling, and other forms of public entertainment, like concerts.
• Income (or Wealth) – Electric vehicles, like the above pictured Tesla X, are still largely a luxury good.  And so, as given consumer’s income increases, she or he is more likely to purchase one.  The demand for most goods, even non-luxuries, are directly related to income.  When the economy is strong and incomes are higher, consumers buy more of all types of automobiles, take more vacations, and buy more leather jackets.  We refer to goods like these as “normal” goods.  But there are some goods that behave differently.  For example, the demand for Ramen Noodles tends to decrease as income increases.  The same is true for used cars, rental housing, and lottery tickets.  These types of goods are referred to as “inferior” goods.  This is of course a misnomer.  There’s nothing necessarily inferior about them.  Simply, consumers tend to switch away from them when incomes increase.
• Price of Related Goods – Referring yet again to the Model X above, how might the demand for this electric vehicle be affected by changes in the price of gasoline.  At $3 per gallon, it’s hard to justify an electric vehicle on financial grounds alone.  But if the price of gasoline increases to $5 per gallon, the numbers make more sense.  When the price of one good increasing causes the demand for another good to increase, we say those goods are substitutes.  An increase in prices at Chick-fil-a will increase demand for Popeyes.  Goods that are generally consumed together are referred to as Complements.  Complements work the other way around.  An increase in the price of a Chick-fil-a sandwich will decrease the demand for sodas from Chick-fil-a. 
• Number of Buyers – This one is pretty obvious.  The larger the market, the greater the demand for the product.  The smaller the market, the smaller the demand.  Remember the second explanation of demand and how we were adding up consumers for whom the price was below their reservation price.  The more buyers, the more consumers for whom this will apply.
• Taxes and Subsidies – This one is also pretty obvious.  Taxes in this case refer to taxes paid by the final customer, as opposed to taxes that are rolled into the price of the product by the seller – like the gasoline tax.  An increase in tax rates increases the effective price reducing demand.  But since we’re not talking about the literal price, this is again a shift in demand.  And if taxes are going up, demand decreases – or shifts left.  Subsidies are the opposite of a tax.  A tax credit like the one that exists for some electric vehicles is like a negative tax.  Since it reduces the effective price, a subsidy increases demand, causing the curve to shift right.

The overall impact of any of these changes is indeterminate.  For anything other than a change in price, we’re looking at either a rightward or leftward shift in Demand.  But the overall impact depends on both Demand and Supply.