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In its most basic form, a linear supply function looks as follows: y = MX + b. In this case, x and y represent the independent and dependent variables. Meanwhile, m shows the slope of the function, and b represents its y-intersect (i.e., the point where the function intersects the y-axis).
3:23 5:27 Suggested clip Finding Equilibrium using Linear Demand and Supply Equations YouTubeStart of suggested client of suggested clip Finding Equilibrium using Linear Demand and Supply Equations
3:23 5:27 Suggested clip Finding Equilibrium using Linear Demand and Supply Equations YouTubeStart of suggested client of suggested clip Finding Equilibrium using Linear Demand and Supply Equations
In its standard form a linear demand equation is Q = a — BP. That is, quantity demanded is a function of price. The inverse demand equation, or price equation, treats price as a function g of quantity demanded: P = f(Q). To compute the inverse demand equation, simply solve for P from the demand equation.
3:23 5:27 Suggested clip Finding Equilibrium using Linear Demand and Supply Equations YouTubeStart of suggested client of suggested clip Finding Equilibrium using Linear Demand and Supply Equations
Derive the demand function, which sets the price equal to the slope times the number of units plus the price at which no product will sell, which is called the y-intercept, or “b.” The demand function has the form y = MX + b, where “y” is the price, “m” is the slope and “x” is the quantity sold.
2:15 6:07 Suggested clip How to Calculate Equilibrium Price and Quantity (Demand and YouTubeStart of suggested client of suggested clip How to Calculate Equilibrium Price and Quantity (Demand and
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