Topic 3.1 - DD Function, DD Curve Function and Market DD

Topic 3.1 - DD Function, DD Curve Function and Market DD

Published on 8 September 2021
Transcript
00:00
Hi there!
00:02
Let's start Topic 3.1, shall we?
00:05
Are you ready??
00:07
Let's go!!!
00:09
You will learn about
00:09
1 - Determinants of demand
00:11
2 - Demand Function
00:13
3 - Demand Curve Function
00:14
4 - Market Demand
00:22
Determinants of demand
00:25
Demand usually are influence by few factors:, such as
00:28
Price of the product
00:30
Income of consumers
00:31
Taste or preferences
00:33
Price of related goods
00:35
Advertising expenditure
00:44
Demand function summarizes the factors that influence quantity demanded In functional form, demand function can be expressed as
00:54
On the other hand, demand curve function shows relationship between quantity demanded and the price of the product.
00:56
In functional form, the demand curve is;
01:04
Let's take this dd function as our example;
01:08
Qx = 240 - 7Px + 6A + 20M Where Qx = Quantity of X sold, Px = Price of X (RM 5), A is advertising expenditure (RM 200) and M is income level (RM 100).
01:15
To derive dd curve function, we need to substitute the value of A and M into the dd function.
01:20
Qx = 240 - 7Px + 6(200) + 20(100)
01:23
Qx = 3440 - 7Px
01:32
and from dd curve function, we can transform it to the conventional form Qx = 3440 - 7Px 7Px = 3440 - Qx Px = (3440 / 7) - (1/7)Q
01:36
Px = 491.4 - 0.143Qx
01:40
Market dd of a product or service is the sum of individual demand. To get the market dd function, add the individual dd function horizontally.
01:49
Let's look at this example
01:51
Given, individual dd function as: Individual 1 ----- Q₁ = 10 – 4p Individual 2 ----- Q₂ = 6 – 3p Individual 3 ----- Q₃ = 15 – 0.9p
01:54
Since Qm = Qa + Qb + Qc + … + Qn Qm = (10 – 4p) + (6 – 3p) + (15 – 0.9p) Qm = 31 – 7.9p or Pm = 3.92 – 0.126Q