PART 2

MELCs based
LINEAR DEMAND FUNCTION
Qd = f(P) - Simple expression

- Variables I Mathematical equations I Represent the relationship of price to Qd.

Wherein:
Variables Description
Qd quantity demanded I linear demand curve
a autonomous demand I Independent variable I factors
influencing
-b slope of demand function I change in Q resulting from a price
change
p price
 Qd = a – b (p)
Qd = 800 - 60 (p)

Quantity demanded slope of demand

function

autonomous demand
Independent variable
 shows the amount consumers are willing and able to purchase at each
price level for a specified period of time.
Demand Function Qd = 800 -60 (p) For every $1 increase in P,
Qd falls by 60 unit
Law of Demand
Sce P (Ᵽ) Qd

A 0 Qd = 800 – 60 (0) = 800

800
B 2 680 Qd = 800 – 60 (2) = 680

C 4 560 Qd = 800 – 60 (4) = 560

D 6 440 Qd = 800 – 60 (6) = 440

E 8 320 Qd = 800 – 60 (8) = 320

F 10 Qd = 800 – 60 (10) = 200

200

MDAS= Multiplication, Division, Addition & Subtraction.

Demand Curve
P

10 F 200
Slope of demand curve
E 320
8
Qd = 800 - 60 (p)
D 440
6 Downward sloping

C 560
4
B 680 Q -intercept

2
A 800

0
2 4 6 8 10 Qd (00s hundreds)
LINEAR SUPPLY FUNCTION
Qs = f(P) - Simple expression

Qs = c + dP
- Variables I Mathematical equations I Represent the relationship of price to Qs.

Where:
Variables Description
Qs quantity supplied
c the level of supply independent of price

d slope of supply

P the market price of the product.

 Qs = c + dP
Qs = -40 + 30P

quantity supplied slope of supply

the level
of supply independent
of price
Supply Schedule (table) and Curve (Graph)
 shows the amount producers plan to sell at each price level for a
specified period of time.
Law of Qs
Supply
= -40 + 30P For every $1 increase in P,
Qs rise by 30 units.

Sce P Qs

A 1 -10 Qs = - 40 + 30 (1) = -10

B 2 20 Qs = - 40 + 30 (2) = 20
C 3 50 Qs = - 40 + 30 (3) = 50
D 4 80 Qs = - 40 + 30 (4) = 80
E 5 110 Qs = - 40 + 30 (5) = 110
F 6 140 Qs = - 40 + 30 (6) = 140
G 7 170 Qs = - 40 + 30 (7) = 170
Complete solution:
1. Qs = - 40 + 30 P 4. Qs = - 40 + 30 P 7. Qs = - 40 + 30 P
= -40 + 30 (1) = -40 + 30 (4) = -40 + 30 (7)
= -40 + 30 = -40 + 120 = -40 + 210
Qs = -10 Qs =80 Qs =170

2. Qs = - 40 + 30 P 5. Qs = - 40 + 30 P
= -40 + 30 (2) = -40 + 30 (5)
= -40 + 60 = -40 + 150
Qs =20 Qs =110

3. Qs = - 40 + 30 P 6. Qs = - 40 + 30 P
= -40 + 30 (3) = -40 + 30 (6)
= -40 + 90 = -40 + 180
Qs =50 Qs =140
 The supply equation: Qs = c +dP I Qs = - 40 + 30P
Supply Curve
P
$/kg

6 g
lo pin
s
ard
5 Up
w

4
Q 110 - 80 30
3 ‘d’ = P
= 5-4 = 1
= 30

1
0
10 20 40 60 80 100 120 140 160 180 Qs (kg)