Demand Function

Demand function is an algebraic expression that shows the functional relationship between the
demand for a commodity and its various determinants affecting it. The determinants of
demand are price of the product, price of the related goods, income of the consumer etc. It can
be expressed as follows
Qx = f(Px, Py, Y, T, A, ………..)
Where,
Qx = Demand for commodity X,
Px = Price of commodity X,
Py = Price of related goods
T = Taste of the consumer,
P = Population size,
A = Advertisement
Though, demand for the commodity affected by various factors, its own price is the most
affected factors for the demand of the commodity. Thus, the demand function shows the
functional relationship between demand and its price. There is negative relationship between
price and quantity demanded for the commodity. And it can be expressed as
Qx = f(Px)
Where, Qx = Demand for commodity X, Px = Price of commodity X
Types of Demand Function
There are two types of demand functions which are as follows
1. Linear Demand Function
A demand function is said to be linear when the slope of the demand curve remains
constant throughout its length.
Qx = a - bPx
In above equation, ‘a’ denotes demand at zero price or autonomous demand and ‘b’ is
the slope of the demand curve. Slope of the demand curve is the ration of the change in
∆Q
quantity demanded to the change in price i.e. b =
∆P
Given the demand function
Qx = 40 - 2Px
Lets compute the demand table and figure at various prices 0, 5, 10, 15, 20 respectively.
It can be tabulated as follows

Linear Demand Schedule

Price per unit (Px) Qx = 40 - 2Px

0 40
5 30
10 20
15 10
20 0

Linear Demand Curve

 In the above figure, AB is the linear demand curve in which slope of demand curve
remains constant all along its length.
2. Non-linear Demand Function
A demand function is said to be non-linear when the slope of a demand curve changes
all along the demand curve. Non-linear demand function gives demand curve instead of
a demand line. A non-linear demand function takes the forms of a power function as
follows.
Qx = aPx-b
Or,
a
Qx = b
Px
Non-linear demand schedule
combinations Px Qx
A 20 40
B 40 20
C 60 10
Based on above schedule,
Slope of demand curve at movement from A to B
∆ Q 20−40 −20
b= = = = -1
∆ P 40−20 20
similarly,
slope of demand curve at movement from B to C
∆ Q 10−20 −10
b= = = = -0.5
∆ P 60−40 20
so, above examples show that rate of change in demand with respect to change in price
vary at different points.
Non-linear Demand Curve
 In the above figure, DD is the non-linear demand curve in which slope of demand curve
changes all along its length.

Movement along a Demand Curve

If other things remaining the same, the quantity demanded increase or decrease due to fall or
rise in the price of a commodity, it is known as movement along the demand curve. It is also
known as the change in quantity demanded for the commodity. Movement is along the same
demand curve, there is no new demand curve is drawn. Increase in quantity demanded due to
fall in price, if other things remaining the same, is known as expansion or extension in demand.
It is also known as increase in quantity demanded. On the other hand, decrease in quantity
demanded due to rise in price, other things remaining the same, is known as contraction in
demand. It is also known as decrease in quantity demanded.
The concept of movement along a demand curve can be explained with the help of following
figure.

In the above figure, DD curve represents demand curve. At initial price OP, quantity demanded
is OQ. At this situation, the consumer is at point A of the demand curve DD. As the price rises
from OP to OP2, the quantity demanded decrease from OQ to OQ1. At this situation, the
consumer is at point C of the same demand curve DD. It is the contraction or decrease in
demand. On the other hand, as the price falls from OP to OP 1, the quantity demanded increase
from OQ to OQ2. At this situation, the consumer is at point B of the same demand curve DD. It is
known as extension or expansion or increase in demand. Therefore, the consumer is moving
from point A to B and A to C along the same demand curve due to change in price of the
commodity, which is the movement along a demand curve.

Shift in Demand Curve (Change in Demand)

When more or less quantity of a commodity is demanded at the same price due to change in
factors other than the price of the commodity, it is called shift in demand curve. It is also known
as change in demand. Here, the other factors are price of related goods, consumer’s income,
taste and preference of the consumer, habit, fashion, taste, population size etc…..). A change in
any these factors causes shift in the demand curve and it is shown by drawing new demand
curve. There are two types of shift in demand curve; they are rightward shift in demand curve
(increase in demand) and leftward shift in demand curve (decrease in demand). If any favorable
change in factors that increase in the quantity demanded that consumers wish to purchase at
given price which shift the demand curve to the right is known as rightward shift or increase in
demand. In this situation, the initial demand curve shift to rightward. On the other hand, if any
unfavorable change in factors that decrease in the quantity demanded that the consumers wish
to purchase at given price which shift the demand curve to the left is known as leftward shift or
decrease in demand. In this situation, the initial demand curve shift to leftward.
The concept of shift in demand curve can be explained with the help of following figure.

In the above figure, DD is the initial demand curve. Let, OP and OQ are price and initial quantity
demand respectively. When initial demand curve DD shifts rightward to D 2D2, it shows increase
in demand from OQ to OQ2 at the same price OP. it is known as the increase in demand. On the
other hand, when initial demand curve DD shifts leftward to D 1D1 quantity demanded decrease
from OQ to OQ1 at the same price OP. It is known as the decrease in demand.