Function of demand reflects dependence of volume of consumer demand for separate goods and services on factors, on it influencing. The goods price and also a consumer income, their expectations, tastes and preferences belongs to such factors first of all.
Instruction
1. Function of demand in the conditions of market mechanisms is defining as it regulates release of goods and services, their range and quality. Demand size in turn depends on needs of people, with change of requirements demand representing, in fact, monetary value of requirements changes.
2. Influence the size of demand as price and not price factors. It is possible to carry the price of goods (P) and also the prices of goods substitutes (Ps) and related products (Rs) to price factors. Not price factors it is considered to be consumer income (V), their tastes and preferences (Z), external conditions of consumption (N), expectation of consumers from purchase of goods (E).
3. The dependence of demand on the specified factors can be expressed function: D = f (P, Ps, Pc, V, Z, N, E). The greatest influence on the size of demand influences, of course, the goods price. Therefore it is accepted to allocate the simplest function reflecting dependence of demand on the price: D = f (P).
4. Mathematically this function can be written down as D = a – b*p where and – the maximum size of demand which is possible on commodity market, b – dependence of change of size of demand on the change in price (demand curve tilt angle), r – the goods price. The sign "minus" at this function means that it has the decreasing appearance.
5. The curve of demand shows dependence between the price of goods and size of demand. The movement along a straight line – change of demand as a result of the change in price. From here the law of demand according to which at reduction of price of goods demand for it increases and vice versa follows.
6. Under the influence of price factors the size of demand changes, but its movement comes on a constant curve from one point in another. Influence of not price factors also leads to change in demand, but the shift of a curve occurs to the right if it grows, and to the left if it falls.