Demand curve formula

The demand curve shows the amount of goods consumers are willing to buy at
each market price.

A linear demand curve can be plotted using the following equation.

Qd = a – b(P)
 Q = quantity demand
 a = all factors affecting price other than price (e.g. income, fashion)
 b = slope of the demand curve
 P = Price of the good.
Inverse demand equation

The inverse demand equation can also be written as

 P = a -b(Q)
 a = intercept where price is 0
 b = slope of demand curve
Example of linear demand curve
Qd = 20 – 2P

Q P
 40 0

38 1

36 2

34 3

32 4

30 5

28 6

26 7

0 20
Change in a

In this case, a has increased from 40 to 50.

This means that for the same price, demand is greater. It reflects a shift in the
demand curve to the right. This could be due to a rise in consumer income which
enables them to buy more goods at each price.
Change in b

In this case, the equation has changed from Q=40-2P to Q= 40-1P

This means the slope is steeper and looks like this.