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Class 2b

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The document discusses demand, including defining demand as a function and curve representing the relationship between quantity demanded and factors that influence demand. It provides an example demand function for tickets to a performance theater (PTC) based on ticket price, nearby entertainment prices, and income. It then substitutes known values for those variables except ticket price to derive the demand curve equation relating ticket price to quantity demanded.

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Demand The willingness and ability to buy McGraw-Hill/Irwin
Demand learning objectives Students should be able to Describe and apply demand function and demand curve Distinguish between change in quantity demanded and change in demand Calculate and interpret demand elasticity McGraw-Hill/Irwin
Demand Function A mathematical representation of the relationship between the quantity demanded and all factors influencing demand: Q = f(X 1 , X 2 , X n ) where Q is quantity demanded and the X i s are the factors influencing demand McGraw-Hill/Irwin
Demand for PTC Tickets Q = 117 - 6.6 P + 1.66 P s - 3.3 P r + 0.00661 I where P is PTC ticket price, P s is price of symphony tickets, P r is price of nearby restaurant meals, and I is average per capita income. (Interpret each term of the above equation.) McGraw-Hill/Irwin
Variable values Suppose the variables have the following values: P = $30 P s = $50 P r = $40 I = $50,000 How many tickets will PTC sell? McGraw-Hill/Irwin
The demand curve Substitute variable values (except for P ) into the equation and simplify: P = 60 - 0.15Q This is the equation for the demand curve . McGraw-Hill/Irwin
Graphing the demand curve McGraw-Hill/Irwin

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Class 2b

  • 1. Demand The willingness and ability to buy McGraw-Hill/Irwin
  • 2. Demand learning objectives Students should be able to Describe and apply demand function and demand curve Distinguish between change in quantity demanded and change in demand Calculate and interpret demand elasticity McGraw-Hill/Irwin
  • 3. Demand Function A mathematical representation of the relationship between the quantity demanded and all factors influencing demand: Q = f(X 1 , X 2 , X n ) where Q is quantity demanded and the X i s are the factors influencing demand McGraw-Hill/Irwin
  • 4. Demand for PTC Tickets Q = 117 - 6.6 P + 1.66 P s - 3.3 P r + 0.00661 I where P is PTC ticket price, P s is price of symphony tickets, P r is price of nearby restaurant meals, and I is average per capita income. (Interpret each term of the above equation.) McGraw-Hill/Irwin
  • 5. Variable values Suppose the variables have the following values: P = $30 P s = $50 P r = $40 I = $50,000 How many tickets will PTC sell? McGraw-Hill/Irwin
  • 6. The demand curve Substitute variable values (except for P ) into the equation and simplify: P = 60 - 0.15Q This is the equation for the demand curve . McGraw-Hill/Irwin
  • 7. Graphing the demand curve McGraw-Hill/Irwin