MICROECONOMICS DEMAND FUNCTION ASSIGNMENT 2022

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MICROECONOMICS ASSIGNMENT

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Questions
1)
Figure 1: The demand and change in demand
(Source: Developed by the learner)
The demand function is Q=a+bP whereas the inverse demand curve is P=(Q-a)/b
While demand function determines quantity corresponding to price, the inverse demand
determines the price corresponding to quantity. Therefore, both these help in determining the
shape of the demand curve. When there is a change in the demand the value of the Q changes
keeping the value of P constant.
2)

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Figure 2: The supply curve
(Source: Developed by the learner)
The supply curve is Q=c+dP and inverse supply is P=(Q-c)/d
Both the firm captures the change in one variable to the other giving the shape of the supply
curve. In case of the change in supply, Q changes with an unchanged level of price.
3)

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Figure 3: The increase in the marginal cost
(Source: Developed by the learner)
Increase in the marginal cost increases the average cost and hence the supply curve shifts to
the left side in the market. The resultant equilibrium changes to a higher price and lower
quantity sold.
4)
For this definition to be accurate the other factors such as the income of the consumer,
changes in tastes and preferences needs to be unchanged.
5)