This preview shows page 1. Sign up to view the full content.
Unformatted text preview: its the yaxis—what we call the supply curve’s “intercept
on the y-axis.”
2. As the price rises, the quantity supplied increases.
If Q S is a positive number, then the price P must
be greater than c. And as Q S increases, the price P
becomes larger. That is, as the quantity increases,
the minimum price that sellers are willing to
accept for the last unit rises.
3. The constant d tells us how fast the minimum
price at which someone is willing to sell the good
rises as the quantity increases. That is, the constant d tells us about the steepness of the supply
curve. The equation tells us that the slope of the
supply curve is d. Price (P ) Price (P ) 1. The price at which no one is willing to buy the
good (Q D is zero). That is, if the price is a, then
the quantity demanded is zero. You can see the
price a in Figure 1. It is the price at which the
demand curve hits the y-axis—what we call the
demand curve’s “intercept on the y-axis.”
2. As the price falls, the quantity demanded
increases. If Q D is a positive number, then the
price P must be less than a. And as Q D gets larger,
the price P becomes smaller. That is, as the quantity increases, the maximum price that buyers are
willing to pay for the last unit of the good falls.
3. The constant b tells us how fast the maximum
price that someone is willing to pay for the good
falls as the quantity increases. That is, the constant b tells us about the steepness of the
demand curve. The equation tells us that the
slope of the demand curve is –b. Supply Curve Intercept on
y-axis is a Supply Intercept on
y-axis is c Slope is –b Slope is d c
0 Quantity demanded (QD) Figure 1 Demand curve 0
Figure 2 Supply curve Quantity supplied (QS) 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 75 Mathematical Note Market Equilibrium 75 Using the demand equation, we have Demand and supply determine market equilibrium.
Figure 3 shows the equilibrium price (P *) and equilibrium quantity (Q *) at the intersection of the
View Full Document