Maths Flashcards
What is the demand function?
Qd= a -bp whereby b is the slope of the function and equal to Qd/P
What is the supply fuction?
Qs = c +dP whereby d is the slope of the function and equals Qs/P.
What does the slope of the demand and supply function show?
How much QD/S changes when the price of one unit changes.
How might demand functions be expanded to become more realistic?
Include factors such as a change in income, change in price of complements or substitiutes.
What is the effect on Qd is price increases by 1: Qd = 171-20P
-20mkg
How to find the equilibrium quantity?
Set Qd=QS then collect like terms to find P. Substitute P into demand and supply function to get the quantity.
When working out the PED what is the co-efficient of P equal to?
Equal to change in Qd/ Change in P
When working out YED - what is equal to the change in qd / change in income?
Equal to the co-efficient of income
When working out the CED - what is equal to the change in qd/change in the price of the substitute?
Equal to the coefficient of the price of the substitute
What is the formula for price after tax? (specific tax). What is the new formula for the quantity supplied?
Market price after tax = price supplier chooses to supply at + tax. New QS = 2(p-t)-16. Then set equal to intial QD formula to solve for new equilibrium.
How to work out the effect of a specific tax on equilibrium price and quantity?
Work out the initial market price and quantity by setting QD=QS. Then work out the price after tax and rearrange so that the new QS = 2(p-t)-16 and set equal to initial QD.
How to work out the tax revenue of a specific tax?
QxT
How to work out the tax incidence?
PES/ PES-PED
How to work out the DWL?
1/2 x b x h
How to find out the effect of an ad valorem tax on price and quantity?
Set inital qd=qs and find initial price and quantity. Then equation for price after tax = the price producers sell at + (rate of the tax x price producers sell at.) rearranged to give P= PS(1+r). Then to find PS it is rearaanged so that PS = P/(1+r). Plug this back into the quantity supplied equation and set equal to intial demand.
