In its standard form a linear demand equation is Q = a – bP. That is, quantity demanded is a function of price. The inverse demand equation, or price equation, treats price as a function f of quantity demanded: P = f(Q). To compute the inverse demand equation, simply solve for P from the demand equation.

Price-Demand (p): is usually given as some P(x) = –ax + b. However, sometimes you have to create P(x) from price information. • P(x) can be calculated using point slope equation given: Price is $14 for 200 units sold.

Demand function shows the functional relationship between Quantity demanded for a commodity and its various Determinants. The quantity demanded is inversely related to price of the products, i.e., if prices fall, the demand will increase.

If the amount bought changes a lot when the price does, then it’s called elastic demand. An example of this is ice cream. You can easily get a different dessert if the price rises too high. If the quantity doesn’t change much when the price does, that’s called inelastic demand.

Using the equation for a straight line, y = mx + b, we can determine the equations for the supply and demand curve to be the following: Demand: P = 15 – Q. Supply: P = 3 + Q.

The demand curve shows the amount of goods consumers are willing to buy at each market price. A linear demand curve can be plotted using the following equation. P = Price of the good….Qd = 20 – 2P.

The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.

A shift in the demand curve is when a determinant of demand other than price changes. It occurs when demand for goods and services changes even though the price didn’t. A shift in the demand curve is the unusual circumstance when the opposite occurs.

Demand Equation or Function The quantity demanded (qD) is a function of five factors—price, buyer income, the price of related goods, consumer tastes, and any consumer expectations of future supply and price. As these factors change, so too does the quantity demanded.

In addition to the factors which can affect individual demand there are three factors that can cause the market demand curve to shift:

• a change in the number of consumers,
• a change in the distribution of tastes among consumers,
• a change in the distribution of income among consumers with different tastes.

Factors that can shift the demand curve for goods and services, causing a different quantity to be demanded at any given price, include changes in tastes, population, income, prices of substitute or complement goods, and expectations about future conditions and prices.

Factors Affecting Demand

• Price of the Product. There is an inverse (negative) relationship between the price of a product and the amount of that product consumers are willing and able to buy.
• The Consumer’s Income.
• The Price of Related Goods.
• The Tastes and Preferences of Consumers.
• The Consumer’s Expectations.
• The Number of Consumers in the Market.

When more quantity is demanded than before at the same price, it is called an increase in demand. When less quantity is demanded than before at the same price, it is called a decrease in demand. A decrease in demand is indicated by a shift in the demand curve to left.

Other things that change demand include tastes and preferences, the composition or size of the population, the prices of related goods, and even expectations. A change in any one of the underlying factors that determine what quantity people are willing to buy at a given price will cause a shift in demand.

A change in demand means that the entire demand curve shifts either left or right. A change in quantity demanded refers to a movement along the demand curve, which is caused only by a chance in price. In this case, the demand curve doesn’t move; rather, we move along the existing demand curve.

A change in demand represents a shift in consumer desire to purchase a particular good or service, irrespective of a variation in its price. An increase and decrease in total market demand is represented graphically in the demand curve.

The various factors affecting demand are discussed below:

• Price of the Given Commodity: It is the most important factor affecting demand for the given commodity.
• Price of Related Goods:
• Income of the Consumer:
• Tastes and Preferences:
• Expectation of Change in the Price in Future:

The demand for a good depends on several factors, such as price of the good, perceived quality, advertising, income, confidence of consumers and changes in taste and fashion. We can look at either an individual demand curve or the total demand in the economy.

An Example of Quantity Demanded Say, for example, at the price of $5 per hot dog, consumers buy two hot dogs per day; the quantity demanded is two. Any change or movement to quantity demanded is involved as a movement of the point along the demand curve and not a shift in the demand curve itself.

The distinction between supply and quantity supplied is similar to the difference between demand and quantity demanded. If the market price of a product increases, then the quantity supplied increases, and vice versa.

Demand elasticity is the extent to which a change in price causes a change in the Quantity Demanded. Demand is elastic when a given change in price causes a relatively smaller change in Quantity Demanded. Demand is unit elastic when a given change in prices causes a proportional change in Quantity Demanded.