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Derive the graph of linear demand function with explanations.

I assue the equation of linear demand function is Q^d = a - bP. I'm not sure how is its graph and how should I explain it. Can someone pls help me

dipendipen asked 2 years ago

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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^\hat P = ab\frac ab

At P^\hat P = ab\frac ab, 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:

graph of linear demand function

ramesrames answered 2 years ago

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