Question

The quantity demanded per month of a certain CD burner is 742 when the price is $257. The quantity demanded per month is 1484 when the price is $204. The suppliers will not market any CD burners if the unit price is $76 or less. At a unit price of $79 they are willing to make available 36 units in the market.
Under the assumption that both supply and demand equations are linear, find demand equation and supply equation.

Answer 1

Ok, ready? :)

Answer 2

yup!

Answer 3

What I would do is a rough/quick sketch to get an idea of what is going on... don't worry about making it too much to scale yet. You just have to get your mind "tuned" to what is happening with supply and demand. Then, hopefully you'll be able to set up the mostly-easy math to get the 2 line equations

Answer 4

I drew a graph with PRICE as the Y-AXIS and QUANTITY as the X-AXIS. Knowing that Y cannot be less or equal to $76. But i dont understand the part "At a unit price of $79, they are willing make available 36 units"

Answer 5

oh... uh oh, you are probably doing your graph the "normal" way, and mine is "sideways"

Answer 6

But what is the definition of demand equation and supply equation? is it the function of going from 0 supply to 742 supplies?

Answer 7

concept is same though, but do supply and demand graphs with price on y axis, not my way... (OOPS!)

Answer 8

At price 76, the supplier offers exactly ZERO units for sale

Answer 9

That quantity 76 becomes the intercept point of the supply line with the price axis

Answer 10

At price 79, the supplier offers 36 units. That is the 2nd point on the supply line. Now you have 2 points and can compute the slope and since you know the intercept already, you can create the supply line equation

Answer 11

Can i use the A (742, $257) point and B (1484, $204) point to find the equation of the demand line?

Answer 12

The demand equation is "How many units will buyers want at each particular price level?"

Again, the problem gives you two points on the demand curve (really just a line in this case). At price 257, buyers DEMAND 742 units. If the price drops to 204, buyers DEMAND 1484 units (note, twice as much demand as at price 257)

Answer 13

yes yes :) short questions, wordy responses :) yes to your last post

Answer 14

Don't make a normal habit of betting your academic future on Wikipedia, but it can help get you off of "stuck" sometimes... here's a link: http://en.wikipedia.org/wiki/Supply_and_demand

Answer 15

HAHAHAHA!!! ill make sure to keep that in mind! Thank you very much AGAIN! :D

Answer 16

So, note, these supply and demand equations are lines. Line equations are easier, which is why they appear first in algebra, but they are not usually good descriptions of REAL supply and demand. Those are usually more curves, and may have messiness to them based on the fact they represent "real people" who are not abstract math concepts :)

Answer 17

But you have to start somewhere in business, and getting supply and demand concepts understood as lines that intersect at an equilibrium is as good a start as any.

Answer 18

Question for you? How should you interpret a supply and demand graph like the following?

Answer 19

oh forget it... graphing isn't working. Was going to ask, "what happens if supply line and demand line do NOT intersect? What situation is described?"

Answer 20

hmmmph

Answer 21

gimme a sec...

Answer 22

lol...supply line simply does not meet the demand of the market?

Answer 23

more or less. If you and everyone else want to buy iPhones for $5, and the whole market is unwilling to spend more than $10 (i.e., demand for iPhones at $11 is zero), but if Apple is unwilling to supply iPhones in any quantity at price of $10 or below (supply is zero for prices <= $10) then there is NO equilibrium point and no buyers receive phones and Apple receives no revenue

Answer 24

so the supplier and the company does not reach agreements? and even if theres a market for it, without the agreement between the production and the company, they cant sell anything?

Answer 25

Well, the idea of a market isn't the store... it's the idea that buyer and seller can find a price on which they agree. For a single buyer and a single seller, that is the market equilibrium. But for a big market of many buyers and many sellers, each buyer and seller may have their own version of what they WISH was the demand or supply curve. However, for typical "widgets", buyers would be foolish to buy above the lowest price they could find, and sellers would be foolish to sell at less than the maximum the market would sustain. So it bounces around to some equilibrium point

Answer 26

If the sellers collectively decide to charge higher prices at any particular quantity level, that raises their demand curve and changes the intersection with the buyers' demand curve. Makes sense too :) if sellers raise prices, buyers will demand less. Sales will still occur though as long as the two lines do actually meet somewhere

Answer 27

if the sellers charge higher meaning that they spend more money to produce?

Answer 28

no, not at all... prices don't have to reflect production costs at all. Do you have any idea how much the materials plus labor cost to make a single iPhone (i.e., iPhone variable costs)?

Answer 29

$10 CAD?

Answer 30

Apple sets prices based on what the market will accept. If iPhone6 comes out priced at $3500, some people will still buy, but overall, quantity sold x $3500 will likely be a whole lot less than if they priced it at $400 and sold a ton more

Answer 31

$10 CAD ? I give up... don't know "CAD"