My economics textbook says that demand curves slope downward - but then goes on to say that when demand increases, prices go up! Does anyone else find this confusing?

Edit: from the small number of answers I have received, it seems that this is not a well understood issue in economics. Is anyone aware of alternative approaches which avoid this contradiction (e.g. I have heard that the Austrian School does not use demand curves)?

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    $\begingroup$ Does your textbook explain what it means by "demand increases"? Is that a movement along the demand curve, or is it a shift of the whole curve? $\endgroup$ – Adam Bailey Jun 1 '18 at 19:27

The book probably intends you to think like this

enter image description here

so you have a downward-sloping demand curve (lower prices lead to higher demand), but if demand increases for a reason not related to price (a shift from the Demand 1 curve to the Demand 2 curve) then the new equilibrium on the upward-sloping supply curve will be at a higher price and quantity

There are a lot of implicit assumptions here, especially

  • the direction of the slope of the supply curve
  • whatever changed the demand curve did not affect the supply curve
  • $\begingroup$ This is exactly the confusion in the book. On the one hand, you are saying that 'lower prices lead to higher demand'. On the other hand, you draw a picture (much like the picture in my textbook) showing the opposite. $\endgroup$ – Sceptical Student Jun 2 '18 at 10:58

Separate the concepts "an increase in quantity demanded" from "shifting of the demand schedule".

The second means that for some reason, say change in tastes, preferences, the whole demand curve shifts: now, quantity demanded for the product has increased for all price levels, compared to the previous situation, but of course the downward slope remains.

Your economics textbook should have said

"Demand curves slope downward - but when demand increases (in the sense of shifting the whole demand curve due to, say, a change in consumer preferences), equilibrium price goes up".

  • $\begingroup$ +1 for clearing up this very common confusion both in textbooks and students $\endgroup$ – Maarten Punt Jun 4 '18 at 10:26

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