In a given market in a given time period, the demand function for a commodity may be defined as “the relation between the various quantities of the commodity demanded and the determinants of those quantities”. These determinants are as follows:
(i) the price of the commodity:
(ii) the income of consumers:
(iii) the tastes of consumers, and
(iv) the price of the commodity.
The exact or precise form of the demand-function depends on how consumers respond to a change in the value of each determinant. If the prices, incomes and tastes of the other commodities are all considered constant, the demand function follows the general law of demand. Demand functions are generally homogeneous, of zero degree, in prices and incomes, i.e. if all prices and incomes change in the same proportion, the quantity demanded remains unchanged.
In mathematical language, a function is a symbolic statement of the relation between dependent and independent variables. The demand function states the relationship between the demand for a product (dependent variable) and its determinants (independent variables).
Demand Function
In a given market in a given time period, the demand function for a commodity may be defined as “the relation between the various quantities of the commodity demanded and the determinants of those quantities”. These determinants are as follows:
1. The price of the commodity;
2. The income of consumers;
3. The tastes of consumers; and
4. The prices of the commodity.
The exact or precise form of the demand function depends on how consumers respond to a change in the value of each determinant. If the prices, incomes and tastes of other commodities are all considered constant then the demand function follows the general law of demand. Demand functions are generally homogeneous, of zero degree, in prices and incomes, i.e. if all prices and incomes change in the same proportion, the quantity demanded remains unchanged.
So we can say that the demand function states the relation between the demand for a product (dependent variable) and its determinants (independent variables).
Let us consider a very simple case of a demand function. Suppose all the determinants of demand for commodity X; other than its price, remain constant. This is the case of
a short-run demand function. In the case of a short-run demand function, the quantity demanded of X; (Dx) depends on its price (Px). The demand function can then be stated as the quantity demanded of commodity X; (Dx) depends on its price (Px)’.
The same statement can be written symbolically as: Dx = f(Px)’
In this function, Dx is a dependent and P, is a independent variable. The function (1) wrote in ‘Comodity X demand (i.e., DX) is its price P’s function. That means change in PX. (independent variable) causes changes in Dx. However, the function (1) does not manifest a change in Dx for the percentage change in Px, i.e., it does not give quantitative relationship between Dx and Px. When the quantitative relationship between D and P is known, the demand function can be expressed as an equation. Linear demand is the usual form of fungus.
This is written as: DX = A – BP
Where ‘A’ is a constant, which shows the total demand for zero price and b = AD/AP4, also a constant, it specifies the change in the Dx response to P changes