The Algebraic Approac2

The Algebraic Approac2 - The Algebraic Approach As with...

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The Algebraic Approach As with demand, it is also possible to model supply using equations. These supply equations, or supply functions, are used to numerically represent firm behavior and the variation of firm behavior with price. For simplicity's sake, we will again use simple algebraic equations. If Amy's bookstore sells textbooks with a supply curve that looks like this: Figure %: Amy's Bookstore's Supply Curve The corresponding equation that describes the bookstore's supply of textbooks will be the equation for the line, or: Q = -10 + P If we want to see how many books the store is willing to sell if the price is $50, we plug 50 in for P and solve for Q. In this case, Q = [-10 + 50] = 40 textbooks If we want to solve for aggregate supply using the algebraic approach instead of the graphical approach, we just add the supply equations together. So, if we're adding Amy's bookstore's supply to Tony's bookstore's supply, it will look like this: Figure %: Aggregate Supply If price is still equal to 50, we find out that together, Amy and Tony will sell
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The Algebraic Approac2 - The Algebraic Approach As with...

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