Demand Function

Demand Function

A demand function describes the mathematical relationship between the quantity demanded and one or more determinants of the demand, as the price of the good or service, the price of complementary and substitute goods, disposable income, etc.

Qdi = f(price i,price j, price k, I,…)

Since the most important determinant of the demand for a good is the price of the good, the demand is usually represented by:

Qdi = f(Pi)

A simple demand function is the linear demand function:


Demand in Economics


Demand Definition: In economics, demand is the quantity of a good that consumers are willing and able to purchase.

The most important determinants of demand are:

  • Price of the good.
  • Price of related goods.
  • Disposable income.
  • Consumer’s preferences.

The Demand Curve and the Law of Demand

The demand curve is a graph that describes the relationship between price and quantity demanded.


Demand Elasticity

The elasticity of the demand shows the responsiveness of the quantity demanded to a change in the price.

It is defined as the proportional change in the quantity demanded, divided the proportional change in the price.

e = (ΔQ/Q)/(ΔP/P)

When the price increases (+), the quantity demanded decreases (-): the demand elasticity is usually negative.