Demand, like any other market mechanism, has its own characteristics and functions. Each of us is faced with demand almost hourly, but not everyone can describe this concept.
Instructions
Step 1
What is demand? Demand is the willingness of buyers to purchase a product at a specified price and at a specific point in time. But this term should not be confused with "demand value". This concept denotes the amount of goods and services that a consumer is willing to buy at a fixed price.
Step 2
As in any system, the market includes a number of laws and principles. In this situation, we are interested in the law of demand. It states that the amount demanded is inversely proportional to the price. In other words, the higher the price of a product, the fewer people want to buy it.
Step 3
It should be noted that there are many factors that affect the amount of demand. These include the price of a given product, prices of other products, consumer income, tastes and preferences, market information, product advertisements, and so on. Thus, we smoothly approached such a concept as the demand function. It denotes the dependence of demand on various factors Q d = f (P, P s 1 … P s n, P c 1 … P c m, I, Z, N, Inf, R, T, E), where Qd is the volume of demand. Since the price of a good is one of the most important factors, the demand function can be written as follows: Qd = f (P), where P is the price.
Step 4
When the demand function has a linear form, that is, it is depicted as a straight line on the graph, it can be found by the formula: Qd = a-b * p (a is the maximum possible demand for this product, b is the dependence of the change in demand on the price, p is the price). The minus sign in this formula shows that the demand function has a decreasing form. Therefore, the demand function can be depicted graphically (Fig. 1)
Step 5
The demand curve denotes the relationship between the amount of demand for a given product and the market price. The action of price factors leads to a change in the amount of demand, moving it to other points along a constant demand curve. The action of non-price factors leads to a change in the demand function and is expressed in a shift of the demand curve to the right (if it grows) and to the left (if it falls).
