In the linear demand equation Qd = a - bP, what does b represent?

In the linear demand equation Qd = a - bP, what does b represent?

• A. Intercept
• B. Price
• C. Quantity demanded at zero price
• D. Slope of the demand curve

Answer: (D)

In a linear demand equation, how quantity demanded responds to price is captured by the slope. In Qd = a − bP, the intercept a gives the quantity demanded when price is zero, and b determines how steep the line is. Because price enters with a minus sign, the slope of the demand curve is −b, so b is the magnitude of that slope. In practical terms, a one-unit rise in price reduces quantity demanded by about b units (holding other factors constant). The units of b are quantity per unit of price. The other parts of the equation correspond to the intercept, the price variable itself, or the quantity at zero price, not to the slope. So b represents the slope of the demand curve.

In a linear demand equation, how quantity demanded responds to price is captured by the slope. In Qd = a − bP, the intercept a gives the quantity demanded when price is zero, and b determines how steep the line is. Because price enters with a minus sign, the slope of the demand curve is −b, so b is the magnitude of that slope. In practical terms, a one-unit rise in price reduces quantity demanded by about b units (holding other factors constant). The units of b are quantity per unit of price. The other parts of the equation correspond to the intercept, the price variable itself, or the quantity at zero price, not to the slope. So b represents the slope of the demand curve.