Information about Demand Curve

Published on June 30, 2009

Author: rehan20784

Source: slideshare.net

Its about demand curve for consumers and the related to different factors

Topics
Linear Function
Definition of Demand
Definition of Demand Function
Generalized Demand Function
Factors Affecting Demand Function
Slope Parameters

Linear Function
Definition
An algebraic equation in which the highest degree term in the variable or variables is of the first degree. The graph of such an equation is a straight line if there are two variables.
In linear equation there are two variable names independent variable and dependent variable.

Linear Equation Cont…
A common form of a linear equation in the two variables x and y is
y = mx + c
Where 'x' and 'y' are the coordinates of the points that satisfy the function and so lie on the straight line graph.
'm' is the gradient of the straight line graph, and
'c' is the 'y intercept' of the straight line graph.

Linear Equation Cont…

Definition of Demand
Demand is the amount of goods and services that consumers in a market are willing and able to purchase during a given period of time

Definition of Demand Function
A Demand Function expresses quantity demanded as a function of product price
The relation between price and quantity demanded per period of time, when all other factor that affects consumer demand are held constant, is called a demand function
A Demand function can be expressed in a most general form as the equation
Qd = a – bP
Where Qd is quantity demanded
a is intercept
b is slope (b = Qd/P)

Generalized Demand Function
Quantity Demanded
Qd= a + bP + cM + dPR+ eT + fPe + gN
b, c, d, e, f and g are slope parameters
P = Price of the goods or services
M = Consumers Income
PR = Price of related goods or services
T = Taste pattern of consumers
Pe = Expected price of the goods in some future period
N = Number of Consumers in the market

Factors Affecting Demand Function
P = Price of the goods or services
Qd= a + bP + cM + dPR+ eT + fPe + gN
There is an inverse relation between the Quality demanded
Here the slope is negative i.e. b is negative

Factors Affecting Demand Function
M = Consumers Income
Qd= a + bP + cM + dPR+ eT + fPe + gN
Direct for normal goods (c is +ve)
Inverse for inferior goods (c is –ve)

Factors Affecting Demand Function
PR = Price of related goods or services
Qd= a + bP + cM + dPR+ eT + fPe + gN
Direct for substitutes (d is +ve)
Inverse for complements (d is -ve)

Factors Affecting Demand Function
T = Taste pattern of consumers
Qd= a + bP + cM + dPR+ eT + fPe + gN
It has the direct relation (e is +ve)

Factors Affecting Demand Function
Pe = Expected price of the goods in some future period
Qd= a + bP + cM + dPR+ eT + fPe + gN
It has the direct relation (f is +ve)

Factors Affecting Demand Function
N = Number of Consumers in the market
Qd= a + bP + cM + dPR+ eT + fPe + gN
It has the direct relation (g is +ve)

Factors Affecting Demand Function

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