The Demand Function

A demand function expresses, in a compact mathematical form, the relationship between the quantity demanded of a commodity and all the determinants that influence it. In its most general form, the demand for a commodity X can be written as:

where $D_x$ is the quantity demanded of commodity X, $P_x$ is the price of X itself, $P_y$ is the price of related goods, $Y$ is the consumer's income, $T$ stands for tastes and preferences, $W$ is the distribution of income, $A$ is advertising expenditure, $E$ is expectations of future prices, and $N$ is population. This general demand function captures every determinant discussed in the previous section acting together.

For most classroom analysis, however, Economics isolates just one determinant — the commodity's own price — and studies how demand responds to it alone, holding every other determinant fixed. This narrower relationship is called the individual (or simple) demand function:

$D_x = f(P_x)$ …