Demand function
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The document discusses the demand function and why the demand curve slopes downward. It explains that the demand function shows the relationship between the quantity demanded and the price of a product. Price is one of the most important factors influencing consumer demand. The demand curve slopes downward for three reasons: 1) the law of diminishing marginal utility, which states that marginal benefits decrease as consumption increases, so consumers will pay less; 2) the income effect, which suggests that lower prices increase consumers' real income and thus their demand; and 3) the substitution effect, where lower prices make a good relatively cheaper compared to alternatives, causing consumers to switch to the more affordable option.
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Demand function
- 2. DEMAND FUNCTION The Demand Function shows the relation between the quality demanded of a community. The consumers and the price of the price of product. These function are probably the most important tools by Economics while many variables determine the quality consumers wish to purchases in a market the price of the commodity is perhaps the most important one.
- 3. THREE (3) Reason why the slope of demand is inversely proportional
- 4. 1. LAW OF DIMIRISHING MARGINAL UTILITY -This law suggest that as mop of product is consumed the marginal benefits to the consumer falls nonce consumers are prepared to pay less.
- 5. 2. INCOME EFFECT -The income and substitution effect can also be used to explain why the demand curve slopes downward. If we assume that money income is fixed the income effects suggest that as the price of good falls real income that is what consumers can buy with there money income rises and increase their demand.
- 6. 3. SUBSTITUTION EFFECT - In addition as the price of one goods falls it because relatively less expensive therefore assuming other alternative product stay at the same price at lower prices the goods appear cheaper and consumers will switch from the expensive alternative to the relatively cheaper one.