HL - Linear Supply and Demand functions

Question 1

What’s the equation for quantity demanded?

Answer 1

QD = a - bp

a: constant (when P=0)
p: price
b: gradient (b is negative due to the demand curve having a negative slope)

Question 2

What happens if there’s a change in the value ‘a’?

Answer 2

It will cause a shift of the demand curve the along the x axis

Question 3

What does a change in the value ‘b’ cause?

Answer 3

It causes a tilt (steepness) of the curve

Question 4

What are the values ‘a’ and ‘b’ affected by?

Answer 4

Non price factors of demand

Question 5

What’s the equation for quantity supplied?

Answer 5

QS = c + dp 
c = constant 
d = gradient (positive because supply curve has a positive gradient) 
p = price

Question 6

What would a change in the values ‘c’ and ‘d’ cause?

Answer 6

A change in c would cause a shift in the supply curve

A change in d would cause a tilt of the supply curve

Question 7

How do you calculate Market equilibrium using linear demand and supply functions?

Answer 7

At the equilibrium QD = QS
Solve to find the value of ‘p’
Then plug back in to both of the equations to find QD and QS