Demand Curve - Linear Demand Curve

Linear Demand Curve

The demand curve is often graphed as a straight line of the form Q = a - bP where a and b are parameters. The constant “a” “embodies” the effects of all factors other than price that affect demand. If income were to change, for example, the effect of the change would be represented by a change in the value of a and be reflected graphically as a shift of the demand curve. The constant “b” is the slope of the demand curve and shows how the price of the good affects the quantity demanded.

The graph of the demand curve uses the inverse demand function in which price is expressed as a function of quantity. The standard form of the demand equation can be converted to the inverse equation by solving for P or P = a/b - Q/b.

More plainly, in the equation P = a - bQ, "a" is the intercept where quantity demanded is zero (where the demand curve intercepts the Y axis), "b" is the slope of the demand curve, "Q" is quantity and "P" is price.

Read more about this topic:  Demand Curve

Famous quotes containing the words demand and/or curve:

    The sun is shining.
    The shadows of the lovers have disappeared.
    They are all eyes; they have some demand on me—
    They want me to be more serious than I want to be.
    Louis Simpson (b. 1923)

    In philosophical inquiry, the human spirit, imitating the movement of the stars, must follow a curve which brings it back to its point of departure. To conclude is to close a circle.
    Charles Baudelaire (1821–1867)