Mathematics Demand And Supply Functions Notes

Chapter 2 : DEMAND, SUPPLY,COST,REVENUE. © John Wiley and Sons 2013www.wiley.com/college/Bradley© John Wiley and Sons 2013Essential Mathematics for Economics and Business, 4th Edition The demand functionThere are several variables that influence the demand for a good X. These may be expressed by the general demand function????=????(????,????,????????,????????,????????,????,…) Where ???? is a function of the independent variables ????,????,????????,????????,????????,????,…where???? is the price of good X???? is the income of the consumer???????? is the price of the substitute good???????? is the price of the supplementary goods???????? is the taste of fashion of the consumer???? is the level of advertising The demand functionThe simplest model for the demand function is written as ????=????(????) Therefore, quantity demanded depends on price only, so long as the other variables upon which demand depends remain constant: that is ????,????????,????????,????????,????,… are constant.In most applications in economics however, ???? is plotted on the horizontal axis and ???? on the vertical axis. In order to do so, the inverse demand function, ????=????−1????=????(????), is generally used.The inverse demand function for ????=200−2???? is given as????=200−2????2????=200−????????=100−0.5???? The equation of the demand functionThe demand function, ????=????(????), can be modelled by the simple linear equation ????=????−????????Where for constants ????,????:????>0 is the vertical intercept and−????<0 is the slope