Lakshminarayan rajaramwhen supply and demand are equal
|
Instructor: Dr. Lakshminarayan Rajaram | |||||
|---|---|---|---|---|---|---|
|
||||||
| • | ||||||
| • | ||||||
| • |
|
|||||
| • |
|
|||||
| y | =−3 + 5 | |||||
| y =f x( ) | . | |||||
|
= | f x( ) | = | mx | + | ,b | for real numbers m and b, is a linear function. |
|---|
Following functions will briefly be introduced in this section but discussed in details in the later
expensive item, and hence, the demand for that item decreases)
• Law of Supply (As the price of an item increases, producers are more likely to see a profit in selling the
• Marginal Cost (MC approximates the cost of producing one additional item. It is the slope of cost
function)
When supply and demand are equal, the economy is said to be at equilibrium.
The equilibrium price of the commodity is the price found at the point where the supply and
Re venue=R x( )=x•p
Pr ofit=P x( )=R x( )−C x( ), where C(x) is the Cost Function
Rental fee of $10 plus $2.25 per hour.
Cost function, C(x) = 2.25x + 10
(e) At price $10, the quantity demanded is (1.25q = 16 – 10) which gives q = 4.8. That is, 480 watches.
2
(b) What is the profit from 100 units?
P(x) = R(x) – C(x)
Profit = 15x – (5x + 20) = 10x – 20
Put x = 100, P(100) = $980
You are given 2 points: (100, 11.02) and (400, 40.12)
Hence, the slope = (40.12 – 11.02)/(400-100) = 0.097.C – 11.02 = 0.097 (x – 100)
C(x) = 0.097x + 1.32.
(f) This simply means that “the cost of producing one additional cup of coffee is 9.7 cents”.
Example 6: Suppose that the fixed cost for a product is $400 and the break-even quantity is 80. Find the marginal profit (that is, the slope of the linear profit function).
