Linear equations

Supply and demand analysis

National income determination
Negative numbers: -1, -2, -3, …
Expressions:
𝑥+𝑦−2
𝑟 𝑛
𝑃 1+
100
Fractions:
1 2
,− ,..
2 5
Equations: 𝑥 2 − 3𝑥 = 7𝑦, …
Inequalities: 𝑥 2 + 4𝑥 − 9 > 0, …
In microeconomics the quantity
demanded, Q, of a good depends
on the market price, P. We might
express this as
Q = f (P)
Such a function is called a demand
function.
Written in the form P = g(Q), then P
is a decreasing function of Q.
The supply function is the relation
between the quantity, Q, of a
good that producers plan to
bring to the market and the
price, P, of the good. P is an
increasing function of Q.
We describe how to set up simple models of the national economy which
enable equilibrium levels of income to be calculated. Initially we assume that
the economy is divided into two sectors, households and firms. National income
represents the flow of income from firms to households given as payment for
these factors. Income can be used for the consumption of goods produced by
firms, or it can be put into savings. Consumption, C, and savings, S, are
therefore functions of income, Y: that is,
C = f(Y), S = g(Y)
for some appropriate consumption function, f, and savings function, g.
The consumption function, C = aY + b, a > 0 and b > 0

Y=C+S