Unformatted text preview: its the yaxis—what we call the supply curve’s “intercept
on the yaxis.”
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 yaxis—what we call the
demand curve’s “intercept on the yaxis.”
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
yaxis is a Supply Intercept on
yaxis is c Slope is –b Slope is d c
Demand
0 Quantity demanded (QD) Figure 1 Demand curve 0
Figure 2 Supply curve Quantity supplied (QS) 9160335_CH03_p053080.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
demand...
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This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.
 Spring '08
 Blanchard
 Microeconomics, Opportunity Cost

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