Demand is defined as a consumer's desire and willingness to pay for a good or service. Demand depends on factors like price, income, tastes, and the prices of related goods. A demand function expresses the quantitative relationship between quantity demanded of a good and the various factors that influence demand. It shows the inverse relationship between price and quantity demanded - as price increases, quantity demanded decreases. The demand function can take the general form of Qd = a - bP, where a is the intercept, b is the slope, Qd is quantity demanded, and P is price. Factors like income, prices of substitutes and complements, tastes, expected future prices, and number of consumers impact the demand function and quantity demanded

1. Demand and Demand
Function
BY ABHIJEET SINGH CHAWRA
MBA (SEM I)
CMAT 2017-19
DMS, JNVU, JODHPUR

2. Demand
 In general terms ‘Demand’ means desire, need , want or
requirement of a commodity.
 So Demand is an economic principle that describes a
consumer’s desire and willingness to pay a price for a
specific good or service. Holding all other factors(such as
price of related goods, income, tastes and preferences,
advertising etc.) constant, an increase in the price of a good
or service will decrease demand, and vice versa.

3.  For instance-
Everyone might have willingness to buy “Mercedes-S Class”
but only a few have the ability to pay for it, a few have the
purchasing power. Thus, everyone cannot be said to have a demand
for the car “Mercedes-S Class”.

4. Demand Function
 Demand Function is a mathematical function showing
relationship between the quantity demanded of a commodity
and the factors influencing demand.
 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

5. What is Quantity Demanded?
 Quantity demanded Is a term used in economics
to describe the total amount of goods or services
demanded at any given point in time. It depends
on the price of a good or service in the
marketplace, regardless of whether that market is
in equilibrium.

6.  Quantities of a commodity which the consumers buy at a
particular price
 It is a flow concept
 Quantity demanded>Quantity available for sale
 Quantity demanded = F(Price)
 Other determinants are assumed to be constant
 Higher the price, lower will be the quantity demanded.

7. Quantity Demanded
 Qd = f( 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

8. 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 = ΔQd / Δ P)

9. 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

10. 0
20
40
60
80
100
10 20 30 40
Quantity
Price
Qd = a - bP
• Here the slope is negative i.e. b is negative

11. 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)

12. 0
20
40
60
80
100
120
10 20 30 40
Quantity
price
for normal goods

13. 0
20
40
60
80
100
10 20 30 40
Quantity
Price
for inferior goods

14. 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)

15. 0
50
100
150
10 20 30 40
Quantity
Price
for substitutes

16. 0
20
40
60
80
100
10 20 30 40
Quantity
Price
for compliments

17.  T = Taste pattern of consumers
Qd = (a, bP, cM, dPR, eT, fPe, gN)
 It has the direct relation (e is +ve)
 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)

18.  N = Number of Consumers in the market
Qd = (a, bP, cM, dPR, eT, fPe, gN)
 It has the direct relation (g is +ve)

19. Variable Relation to Qd Sign of Slope Parameter
P Inverse b = Qd/ P is negative
M Direct for normal goods
Inverse for inferior goods
c = Qd/ M is positive
c = Qd/ M is negative
PR Direct for substitutes
Inverse for complements
d = Qd/ PR is positive
d = Qd/ PR is negative
T Direct e = Qd/ T is positive
Pe Direct f = Qd/ Pe is positive
N Direct g = Qd/ N is positive
Factors Affecting Demand Function