Gobbet # 2:
Consumer Demand
(These problems are adapted from Callan and Thomas:
Environmental Economics and
Management
, 2004)
Consider the following demand schedule for bottles of water:
PRICE (P)
Quantity Demanded by Consumers
(bottles/month)
$0.50
1,100
1.00
1,050
1.50
1,000
2.00
950
2.50
900
3.00
850
3.50
800
4.00
750
4.50
700
5.00
650
Plot the demand curve in product space (that is with prices along the vertical axis and
quantity along the horizontal axis).
Derive the linear demand and inverse demand equations from the table.
SOLUTION
11.50
1,150
Demand
Quantity
Price
1
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
To derive the demand and inverse demand equations you can use the pointslope formula.
The
demand equation
describes
quantity
as a function of
price
.
The appropriate equation will have the form:
Q
d
= m P + b
where
m
is the slope, and
b
is the intercept.
(The subscript
d
on
Q
indicates that we are looking at demand)
The
inverse demand equation
describes
price
as a function of
quantity
.
At various
points in this course we will also refer to the inverse demand function as the
marginal
benefit function.
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '07
 POE,G.
 Supply And Demand, Price point, Inverse demand function, inverse demand, inverse demand equation

Click to edit the document details