Business
Demand Function
A demand function represents the relationship between the quantity of a good or service demanded and the factors that influence it, such as price, income, and consumer preferences. It is typically expressed as an equation and helps businesses understand how changes in these factors affect consumer demand for their products or services. By analyzing the demand function, businesses can make informed decisions about pricing, production, and marketing strategies.
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6 Key excerpts on "Demand Function"
eBook - PDF- Irvin B. Tucker, Irvin Tucker(Authors)
- 2016(Publication Date)
- Cengage Learning EMEA(Publisher)
Demand represents the choice-making behavior of consumers, while supply represents the choices of producers. The chapter begins by looking closely at demand and then supply. Finally, it combines these forces to see how prices and quantities are determined in the marketplace. Market demand and supply analysis is the basic tool of microeconomic analysis. IN THIS CHAPTER, YOU WILL LEARN TO SOLVE THESE ECONOMICS PUZZLES: • What is the difference between a “ change in quantity demanded ” and a “ change in demand ” ? • Can Congress repeal the law of supply to control oil prices? • Does the price system eliminate scarcity? Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. ............................................................................................................................................................................................. ............................................................................................................................................................................................. 3-1 THE LAW OF DEMAND Economics might be referred to as “ graphs and laughs ” because economists are so fond of using graphs to illustrate demand, supply, and many other economic concepts. Unfor-tunately, some students taking economics courses say they miss the laughs. Exhibit 1 reveals an important “ law ” in economics called the law of demand . The law of demand states there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.
eBook - PDF- Rhona C. Free(Author)
- 2010(Publication Date)
- SAGE Publications, Inc(Publisher)
7 SUPPLY, DEMAND, AND EQUILIBRIUM KEVIN C. KLEIN Illinois College T he underlying foundation for much of the content for all other chapters in this reference manual is the economic concepts of supply and demand. In reading this chapter, you will begin to understand the basic concepts of supply and demand and how changes in the actions of buyers and sellers influence market prices. Markets are defined as any place where products or resources are exchanged. Every market has two sides: buy-ers and sellers. Buyers, or demanders, are those who pur-chase the product or resources. Sellers, or suppliers, are those who provide the products or resources for sale in the market. What motivates these market participants? Although many factors motivate buyers' and sellers' behavior, economists assume that the primary motivating factor is self-interest. Buyers are assumed to be motivated by their desire to improve overall satisfaction, or utility, in life. Sellers are assumed to be motivated by the desire to earn profits. The discussion below begins with the buyer side of the market, known as demand. Demand Let us begin our discussion of demand by defining three concepts: demand (D), quantity demanded (Q d ), and the law of demand. Demand is defined as the amount of a product that buyers are willing and able to purchase at all prices. A consumer is said to demand a product if he or she is both willing and able to purchase a product. A consumer who is willing to purchase a product, but is unable to do so, is not considered to be part of the market demand because he or she will not actually purchase the product. Likewise, a consumer who is able but unwilling to buy a product is also not considered to be part of market demand. Quantity demanded is defined to be the amount of a product that buyers are willing and able to purchase at a specific price.
eBook - PDFMicroeconomics
Equilibrium and Efficiency
- Thijs ten Raa(Author)
- 2017(Publication Date)
- Red Globe Press(Publisher)
39 II The Demand Side of the Economy In this part of the book we develop a rather formal yet practical approach to economic modeling. First we define an economy, its main operations – production and consumption – and the closely related concepts of supply and demand. Not surprisingly, the first building block of our economic modeling is the consumer theory. After all, the objective of an economic system is to meet consumer needs. Production is merely a means to achieve this end. Part II consists of three chapters. Chapter 3 models consumer preferences by means of utility functions. A utility function is a tool for comparing alterna-tive bundles of goods and services; it reveals which one is preferred. In applied economic models, utility functions are of the constant elasticity of substitution variety, a tool that will be explained in detail. Chapter 4 analyzes the implications for the demand side of the economy, how consumers respond to price and income changes. Chapter 5 attempts to measure the standard of living, shows how this can be done and outlines the potential pitfalls. 41 3 Utility and expenditures 3.1 Introduction An economy is a machine operated by producers who transform resources into goods and services that can be used by consumers. The transformation into goods and services is called production and the use is called consumption . In market economies both producers and consumers respond to prices. Producers shift their resources to the production of goods and services that carry a good price. In other words, the quantities produced are functions of the prices; these func-tions are the supply functions. Supply functions summarize what producers do under the assumption of profit maximization. Consumers allocate their budgets to goods and services that carry a good price, but now it means a low price. The quantities consumed are also functions of the prices, namely Demand Functions.
eBook - PDF- Deborah Hughes-Hallett, Andrew M. Gleason, Daniel E. Flath, Patti Frazer Lock, Sheldon P. Gordon, David O. Lomen, David Lovelock, William G. McCallum, Brad G. Osgood, Andrew Pasquale, Jeff Tecosky-Feldman, Joseph Thrash, Karen R. Rhea, Thomas W. Tucker(Authors)
- 2022(Publication Date)
- Wiley(Publisher)
Since (0) = 20,000, the vertical intercept is 20,000, so () = 20,000 − 1700 dollars. Supply and Demand Curves The quantity, , of an item that is manufactured and sold depends on its price, . As the price in- creases, manufacturers are usually willing to supply more of the product, whereas the quantity de- manded by consumers falls. 1.4 APPLICATIONS OF FUNCTIONS TO ECONOMICS 39 The supply curve, for a given item, relates the quantity, , of the item that manufacturers are willing to make per unit time to the price, , for which the item can be sold. The demand curve relates the quantity, , of an item demanded by consumers per unit time to the price, , of the item. Economists often think of the quantities supplied and demanded as functions of price. However, for historical reasons, the economists put price (the independent variable) on the vertical axis and quantity (the dependent variable) on the horizontal axis. (The reason for this state of affairs is that economists originally took price to be the dependent variable and put it on the vertical axis. Later, when the point of view changed, the axes did not.) Thus, typical supply and demand curves look like those shown in Figure 1.61. 0 Supply (price/unit) (quantity) 1 1 Demand (quantity) (price/unit) Figure 1.61: Supply and demand curves Example 7 What is the economic meaning of the prices 0 and 1 and the quantity 1 in Figure 1.61? Solution The vertical axis corresponds to a quantity of zero. Since the price 0 is the vertical intercept on the supply curve, 0 is the price at which the quantity supplied is zero. In other words, for prices below 0 , the suppliers will not produce anything. The price 1 is the vertical intercept on the demand curve, so it corresponds to the price at which the quantity demanded is zero. In other words, for prices above 1 , consumers buy none of the product.
eBook - PDFIntermediate Microeconomics
A Tool-Building Approach
- Samiran Banerjee(Author)
- 2021(Publication Date)
- Routledge(Publisher)
Chapter 1 Markets As a segue into the material of intermediate-level microeconomics, we begin with some familiar material from your introductory microeconomics class: market demand, supply, and equilibrium. Then, we take up market inter-ventions such as taxes and subsidies, topics which should also be somewhat familiar to you. We cover the same material but utilize algebra in addition to graphs. Finally, we revisit various elasticity concepts from a principles-level class using calculus. 1.1 Market Demand and Supply Consider a single product (say, the market for steel) over a specific geograph-ical area and a relatively short time period, such as a few months. 1.1.1 Plotting a market Demand Function A market Demand Function shows how much is demanded by all potential buyers at different prices and is written generically as Q d = D ( p ) . Here, Q d is the total quantity demanded and is the dependent variable, while the per-unit price, p , is the independent variable. An example of such a market Demand Function is given by the equation Q d = 120 − 2 p , (1.1) where Q d is measured in thousands of tons and p in dollars per ton. The fact that the derivative dQ d / dp is negative means that this market demand 1 2 Chapter 1 p Q d 0 50 40 30 20 10 60 100 80 60 40 20 120 Figure 1.1 Market demand embodies the so-called “ Law of Demand ”: keep ing all other fac tors fixed, as the price of a prod uct in creases, its quan tity de manded de creases. 1 Since an independent variable is measured along the horizontal axis and the dependent variable along the vertical, the variable p ought to be on the horizontal axis and Q d on the vertical. However, economists customarily put p on the vertical axis and Q d on the horizontal axis, thereby depicting the inverse market demand by switching the variables in equation (1.1) and writing the price as a function of the quantity demanded: Q d p = 60 − .
eBook - PDF- Tucker, Irvin Tucker(Authors)
- 2016(Publication Date)
- Cengage Learning EMEA(Publisher)
............................................................................................................................................................................................. ............................................................................................................................................................................................. 3-1 THE LAW OF DEMAND Economics might be referred to as “ graphs and laughs ” because economists are so fond of using graphs to illustrate demand, supply, and many other economic concepts. Unfor-tunately, some students taking economics courses say they miss the laughs. Exhibit 1 reveals an important “ law ” in economics called the law of demand . The law of demand states there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus. The law of demand makes good sense. At a “ sale, ” consumers buy more when the price of merchandise is cut. EXHIBIT 1 An Individual Buyer ’ s Demand Curve for Blu-rays Bob ’ s demand curve shows how many Blu-rays he is willing to purchase at different possible prices. As the price of Blu-rays declines, the quantity demanded increases, and Bob purchases more Blu-rays. The inverse relationship between price and quantity demanded conforms to the law of demand. 20 5 Price per Blu-ray (dollars) 16 12 8 4 0 10 15 20 Quantity of Blu-rays (per year) A C D B Demand curve An Individual Buyer ’ s Demand Schedule for Blu-rays Point Price per Blu-ray Quantity demanded (per year) A $20 4 B 15 6 C 10 10 D 5 16 Law of demand The principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to pur-chase in a defined time period, ceteris paribus. CHAPTER 3 | Market Demand and Supply 59 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
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