Variables
Description
What is this formula?
The Linear Demand Function models the relationship between price and quantity demanded using a straight-line demand curve.
It assumes that quantity demanded decreases linearly as price increases.
When to use it
Use this formula in introductory and intermediate microeconomics, market analysis, pricing models, and equilibrium calculations.
Example
Demand intercept:
a = 1000
Demand slope:
b = 20
Price:
P = 15 USD
Formula:
Qd = a − bP
Substitution:
Qd = 1000 − (20 × 15)
Qd = 700 units
Result:
At a price of 15 USD, consumers demand 700 units.
Applications
- Demand estimation
- Market equilibrium analysis
- Consumer behavior studies
- Economic education
- Pricing strategy
Note
The linear demand function is a simplified model. Real-world demand curves may be nonlinear and influenced by income, preferences, expectations, and the prices of related goods. However, the linear form remains one of the most widely used demand models in economics.