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Table of Contents

  1. Topic pack - Microeconomics - introduction
  2. 1.1 Competitive Markets: Demand and Supply
  3. 1.1 Competitive Markets: Demand and Supply - notes
    1. The nature of markets
    2. Types of markets
    3. Market structure
    4. Spectrum of competition
    5. Demand
    6. The law of demand
    7. Individual and market demand
    8. Non-price determinants of demand
    9. Movements along the demand curve
    10. Shifts in the demand curve
    11. Example - shifts and movements along a demand curve
    12. Exceptions to the normal law of demand
    13. Linear demand functions
    14. Linear demand functions - example
    15. The law of supply
    16. Non-price determinants of supply
    17. Movements along the supply curve
    18. Shifts in the supply curve
    19. Shifts and moves of supply curve
    20. The real supply curve?
    21. Linear supply functions
    22. Linear supply functions - example
    23. Market equilibrium
    24. Market equilibrium - notes
    25. Excess demand and excess supply
    26. Example 1 - the market for DVD players
    27. Example 2 - the market for fish
    28. Applications of demand and supply
    29. Calculating market equilibrium
    30. Calculating equilibrium - example
    31. Scarcity and choice
    32. Choice and opportunity cost
    33. Price signalling
    34. Market efficiency - consumer surplus
    35. Market efficiency - producer surplus
    36. Allocative efficiency
  4. 1.1 Competitive markets - questions
  5. 1.1 Competitive markets - simulations and activities
  6. 1.2 Elasticities
  7. 1.2 Elasticities - notes
  8. Section 1.2 Elasticities - questions
  9. Section 1.2 Elasticities - simulations and activities
  10. 1.3 Government intervention
  11. 1.3 Government Intervention - notes
  12. 1.3 Government intervention - questions
  13. 1.3 Government intervention - simulations and activities
  14. 1.4 Market failure
  15. 1.4 Market failure - notes
  16. Section 1.4 Market failure - questions
  17. Section 1.4 Market failure - simulations and activities
  18. 1.5 Theory of the firm
  19. 1.5 Theory of the firm - notes (HL only)
  20. Section 1.5 Theory of the firm - questions
  21. Section 1.5 Theory of the firm - simulations and activities
  22. Print View

Linear demand functions - Paper 3 Calculations HL Only

Syllabus: Linear demand functions (equations), demand schedules and graphs

Explain a demand function (equation) of the form Qd = a – bP.
• Plot a demand curve from a linear function (eg. Qd = 60 – 5P).
• Identify the slope of the demand curve as the slope of the demand function Qd = a – bP, that is –b (the coefficient of P).
• Outline why, if the “a” term changes, there will be a shift of the demand curve.
• Outline how a change in “b” affects the steepness of the demand curve.

 NB: If `a´ increases (from 60 to 80 say) demand will increase at very price level (shift to the right) and conversely if `a´ decreases (from 60 to 55 say) demand decreases at every price level (shift to the left).
NB: -b is made up of two components the sign (negative) and the number (b)

the negative sign is because of the inverse relationship between price and quantity demanded (Law of demand)
the number indicates the gradient (slope), the bigger the number the less steep (flatter) the demand curve, the lower the number the more steep - can you say why?
Let´s Do Some Economics
Plot 3 chosen demand functions based on Qd = 60 - 5P
Just change the coefficient on P say 10P and 3P
See what happens to the gradient as the coefficent becomes bigger
Confirm the rule: The bigger the coefficient the f------ (---- steep) the demand curve

For HL, you need to be able to understand linear demand functions and to be able to calculate demand and plot a demand curve from a demand function. The presentation below goes through this. Click on the screenshot or link below to open the presentation. It will open in a new web window. You will need a headset or speakers to listen to the explanation.