Demand function

Updated: Aug 20, 2021

The relationship between the quantity of good which a consumer wants to buy and the variables which determine this demand, e.g. price of the good, prices of complementary goods and substitutes, income, consumer credit conditions, etc. By holding constant all these variables except one, we can study the relationship between quantity demanded and this one variable by observing how the former varies with changes in the latter. The demand curve is an example of this procedure, with everything held constant in the relationship except price and quantity demanded. Tastes, needs and habits of the consumer do not enter in as explicit variables in the demand function. Rather they determine the form the function takes.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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