explain individual demand function
Answers
Concept of Demand
Demand refers to the quantity of a commodity or a service that people are willing to buy at a certain price during a certain time interval. It can be termed as a desire with the ‘willingness’ and ‘ability’ to pay for a commodity.
An increase in the price of the commodity decrease the demand for that commodity, while the decrease in price increases its demand. The phenomena is termed as law of demand.
Concept of 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. This includes income and price along with other determining factors.
Here, the demand for the commodity is the dependent variable, while its determinants are the independent variables.
Determinants of Demand
Price of the given commodity
Other things remaining constant, the rise in price of the commodity, the demand for the commodity contracts, and with the fall in price, its demand increases.
Price of related goods
Demand for the given commodity is affected by price of the related goods, which is called cross price demand.
Income of the individual consumer
Change in consumer’s level of income also influences their demand for different commodities. Normally, the demand for certain goods increase with the increasing level of income and vice versa.
Tastes and preferences
The taste and preferences of individuals also determine the demand made for certain goods and services. Factors such as climate, fashion, advertisement, innovation, etc. affect the taste and preference of the consumers.
Expectation of change in price in the future
If the price of the commodity is expected to rise in the future, the consumer will be willing to purchase more of the commodity at the existing price. However, if the future price is expected to fall, the demand for that commodity decreases at present.
Explanation:
hope it will help you
mark me as brainlist
