The relation between the consumer's optimal choice of the quantity of a good and its price is called?
Correct Answer :
Demand Function
Solution :
The correct option is Demand Function.
In economics, a consumer's optimal choice of the quantity of a commodity depends on its price, the prices of other goods, the consumer's income, and their tastes and preferences. The direct relationship specifically between the consumer's optimal choice of the quantity of a good and its price, keeping all other factors constant (ceteris paribus), is defined as the demand function.
Mathematically, the demand function for a good can be represented as:
where:
• represents the quantity demanded of the good.
• represents the price of the good.
• is the functional relationship showing how quantity changes in response to price changes (typically showing an inverse relationship, known as the Law of Demand).
Here is why the other options are incorrect:
• Supply function: Represents the relationship between the quantity of a good that producers are willing to sell and its price.
• Cost function: Represents the relationship between the cost of production and the level of output produced.
• Output function: Relates input factors of production to the total output produced (often referred to as a production function).
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