Demand

Demand
• The quantity of a good or service
that consumers are willing and
able to buy at a given price
during specified period.
Factors determining Demand

Prices play role But before

in determining Price lets see
Demand. other factors
 other factors

Consumer Information and Price of other Govt Rules and

People’s income
Tastes Misinformation goods Regulations

Oat Meal
Substitutes Sales Tax
Example

Compliment Bans
There may be factors:

Friends Season
A change in another
factor (except Price )
causes the demand
curve to shift

Like, Increase in income, cause curve to shift

upward.
Now let's discuss Price’s Role

Economists must Price causes the

hold constant movement along
other factors. the curve

(Eg) coffee
Demand Function

Explains How much

Shows The connection
people are willing to
between quantity
buy at given price and
demanded, price and
how other factors
other factors.
affect this
General Form of Demand
Function
• Q=D(p,ps,Y)
• P=Price of coffee
• Q= Coffee Demanded
• D= Coffee Demand Function
• Ps= Price of Sugar
• Y= Consumers income
Let Q=12-p

If P=0, shows the

If Q=0, no quantity
quantity
is demanded at
demanded if
price 12
coffee is free.
 Law of Demand

“Consumers Demand Curve

Derivative is
Demand more at slopes
negative
lower price.” downward

Because derivatives
shows movement High Price, Low
along the curve as Demand
we vary price.
Let Q=D(P)
• dQ/dp<0
Summing Demand Functions

Total Demand= Sum

of each quantity
demanded by each Q=Q1+Q2=D1(p)+D2(P)
consumers