Simple_Demand_Functions.docx

# Simple_Demand_Functions.docx

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Simple Demand Functions Starter: Revision from last lesson the demand curve: The law of demand requires that the price of a god and the quantity demanded per period, ceteris paribus, are inversely related. Denoting Price by P and quantity demanded by Qd, a demand function of the form: Is the simplest for that keeps the requirement that the two variables, price and quantity demanded are inversely related. The functional form Qd = a – bP is an example of a linear function (straight line) – this is the only form you are required to know for your HL P3 exam. It will always be a straight line, so you should be able to draw this and plot it with your ruler. Examples of linear demand functions include: Qd = 100 – 2P Qd = 60 – 4P Qd = 5000 – 25P Finding the P and Qd Intercepts of a linear Demand Function To find the P intercept for the demand function, set Qd = 0 and then solve for P. For example:

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