DEMAND FUNCTION
a mathematical expression that shows the relationship between
the quantity demanded (Qd) of a good and the factors that
influence it.
It explains how much consumers are willing to buy depending on
price and other determinants.
General Form: Qd = f(P,Y,Ps,Pc,T,N,E)
Simplified:
Qd=a−bP
Example#1:
The demand function for a certain snack is:
Qd=40−2P
Where:
Qd = quantity demanded
P = price (in pesos)
Required:
1. Calculate the quantity demanded at prices ₱5, ₱10, and ₱15.
2. Make a demand schedule.
3. Plot the demand curve (Price on Y-axis, Quantity on X-axis).
Answer for Example#1:
1. Calculate the quantity demanded at prices ₱5, ₱10, and ₱15.
Qd = 40-2P
= 40-2(₱5)
= 40-10
Qd = 30 for ₱5, the quantity demanded is 30.
Qd = 40-2P
= 40-2(₱10)
= 40-20
Qd = 20 for ₱10, the quantity demanded is 20.
Qd = 40-2P
= 40-2(₱15)
= 40-30
Qd = 10 for ₱15, the quantity demanded is 10.
2. Make a demand schedule.
Price Qd
₱5 30
₱10 20
₱15 10
3. Plot the demand curve (Price on Y-axis, Quantity on X-axis).
₱15
Price ₱10
₱5
30 20 10
Qd
Example#2:
The demand function for milk tea is given as:
Qd=100−5P
Where:
Qd = Quantity demanded (cups)
P = Price (in pesos)
Required:
1. Compute the quantity demanded when P=₱10, P=₱15, P=₱20
2. Make a demand schedule
3. Plot the demand curve (Price on Y-axis, Quantity on X-axis)
Answer for Example#2:
1. Calculate the quantity demanded at prices ₱10, ₱15, and ₱20.
Qd = 100-5P
= 100-5(₱10)
= 100-50
Qd = 50 for ₱10, the quantity demanded is 50.
Qd = 100-5P
= 100-5(₱15)
= 100-75
Qd = 25 for ₱15, the quantity demanded is 25.
Qd = 100-5P
= 100-5(₱20)
= 100-100
Qd = 0 for ₱20, the quantity demanded is 0.
2. Make a demand schedule.
Price Qd
₱10 50
₱15 25
₱20 0
3. Plot the demand curve (Price on Y-axis, Quantity on X-axis).
₱20
Price ₱15
₱10
50 25 0
Qd
Example#3:
Demand for Ice Cream Cones
Quantity Demanded
Price (₱)
A local ice cream shop wants to know how the price (cones/day)
of an ice cream cone affects the number of cones
customers buy each day. 10 90
Required Tasks: 15 70
1. Plot the Demand Curve
20 50
Put Price (₱) on the Y-axis.
Put Quantity Demanded on the X-axis. 25 30
Connect the points to form the demand curve.
2. Find the Demand Function 30 10
Answer for Example#3:
1. Plot the Demand Curve
Put Price (₱) on the Y-axis.
Put Quantity Demanded on the X-axis.
Connect the points to form the demand curve.
₱30
₱25
₱20
Price
₱15
₱10
90 70 50 30 10
Qd
2. Find the Demand Function
Qd=a−bP
a = Q1 + bP1 b = Q1 - Q2
P1 - P2
Note: We need to solve first the b or the slope of the demand function,
which shows that demand decreases as price increases.
b = Q1 - Q2
P1 - P2
= 90-10
10-30
= 80
-20
b = -4
a = Q1 + bP1
= 90 + 4(10) (instead of negative 4, this will turn into positive 4)
= 90 + 40
a = 130
So the demand function will be:
Qd = 130 - 4P
Note: To check if our demand function is correct, use it to see if
it matches the demand schedule in the problem.
Qd = 130 - 4P
= 130 - 4(10)
= 130 - 40
Qd = 90 for ₱10, the quantity demanded is 90.
Qd = 130 - 4P
= 130 - 4(15)
= 130 - 60
Qd = 70 for ₱15, the quantity demanded is 70.
Qd = 130 - 4P
= 130 - 4(20)
= 130 - 80
Qd = 50 for ₱20, the quantity demanded is 50.
Qd = 130 - 4P
= 130 - 4(25)
= 130 - 100
Qd = 30 for ₱25, the quantity demanded is 30.
Qd = 130 - 4P
= 130 - 4(30)
= 130 - 120
Qd = 10 for ₱30, the quantity demanded is 10.
As you can see, these values match all the entries in the demand
schedule, which means we have the correct demand function.