Determinants of Demand - Demand Function

• A demand function shows the relationship between the quantity demanded for a product and the various factors that affect its demand.
• It captures how demand depends on price, income, tastes, expectations, population, and government policy.

\[\mathrm{D_n}=f\left(\mathrm{P_{n^{\prime}}P_1\ldots P_{n-1^{\prime}}Y,T,E,H,\overline{Y},G\ldots}\right)\]

'Dn' denotes the demand for a particular commodity 'n'.
'f' shows the functional relation between the demand for the commodity 'n' and the factors affecting its demand.
'Pn' is the price of commodity 'n'.
'P₁...Pₙ₋₁' indicates the price of all other commodities.
'Y' is the income,
'T' stands for the taste.
'E' stands for expectations.
'H' is the size of the population.
'Y' stands for the distribution of income.
'G' is the government's policy.

This shows demand as the dependent variable influenced by these independent variables.

During festive seasons, demand for sweets and gifts rises even if prices stay the same or are a little higher because tastes and expectations change.

• Demand depends on many variables, not just the product’s price.
• The demand function captures these influences in one equation.
• Typically, price and demand move in opposite directions.
• Changes in any determinant shift the demand curve right (increase) or left (decrease).