The equation of linear demand function,
Qd = a - bP
where a and b are parameters and a, b > 0.
a is a finite value which indicates that at price = 0, consumers will buy ‘a’ amount of goods.
-b is the slope of function:
when, Qd = 0
we get, 0 = a - bP
so, P = P^ = ba
At P^ = ba, the quantity demanded will be 0. The negative is introduced in slope (b) in order to show if the price increases then quantity demand decreases.
You are right, Dipen. Lemme help you.
The equation of linear demand function,
Qd = a - bP
where a and b are parameters and a, b > 0.
a is a finite value which indicates that at price = 0, consumers will buy ‘a’ amount of goods.
-b is the slope of function:
when, Qd = 0
we get, 0 = a - bP
so, P =P^ = ba
AtP^ = ba , the quantity demanded will be 0. The negative is introduced in slope (b) in order to show if the price increases then quantity demand decreases.
A graph is shown below:
rames answered 2 years ago