Demand curve formula

The demand curve shows the amount of goods consumers are willing to buy at each market price.

A linear demand curve can be plotted using the following equation.

Qd = a – b(P)

  • Q = quantity demand
  • a = all factors affecting price other than price (e.g. income, fashion)
  • b = slope of the demand curve
  • P = Price of the good.

Inverse demand equation

The inverse demand equation can also be written as

  • P = a -b(Q)
  • a = intercept where price is 0
  • b = slope of demand curve

Example

Qd = 20 – 2P

s-d-equation

QP
400
381
362
343
324
305
286
267
020

a

Change in a

change-in-a-demand-curve-equation

In this case, a has increased from 40 to 50.

This means that for the same price, demand is greater. It reflects a shift in the demand curve to the right. This could be due to a rise in consumer income which enables them to buy more goods at each price.

Change in b

In this case, the equation has changed from Q=40-2P to Q= 40-1P

This means the slope is steeper and looks like this.

change-in-b-supply-demand-equation

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