1/12/2009
2
Demand functions and curves
•
A demand function:
– A relationship between the quantity demanded (per
time period by a given set of individuals) and other
variables
USC Marshal
– Mathematically, we can summarize this relationship
by writing
Q
x
d
D
p
x
,
I
,
p
y
,...
Demand functions and curves
•
Examples of demand levels:
– When the price of a new car is $3,000, income of
consumers is $10,000 and the price of a used car
is $2,000, the quantity of new cars demanded is
14,000.
USC Marshal
– Let
P
new
= $6,000,
I
=$15,000 and
P
used
= $2,000.
Then,
Q
new
= 13,000
– Let
P
new
= $4,000,
I
=$10,000 and
P
used
= $4,000.
Then,
Q
new
= 13,000
– And so on…
Demand functions and curves
• Much more efficient to represent the relationship
mathematically. In this case, the demand function is
• What about graphically?
Q
new
d
15
−
1
2
P
new
1
10
I
−
1
4
P
used
USC Marshal
– Drawing in three dimensions is hard
– Drawing in four dimensions is impossible
• What is the primary relationship?