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Hello Tutor, I have a question about demand function which the question is come from F5 Sep/Dec 2017past year paper Q31 TR co part (a)
The answer said that “The maximum demand for Parapain is 1,000,000 units, so where P = 0, Q = 1,000,000, so ‘a’ is established by substituting
these values for P and Q into the demand function:
0 = a – (0·0004 x 1,000,000)
0 = a – 400
Therefore a = 400
Demand function is therefore: P = 400 – 0·0004Q”Why the maximum demand, the P will be equal to zero? Can you please explain the reason for me? Thank you so much, appreciate your help
We assume the demand price relationship is linear. The lower the price then the more the demand. The lowest possible price is 0, and therefore that is the price at which the demand will be a maximum.
This is all explained in my free lectures. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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