Theory question 101
Theory of DemandSection A (answer one question only from this section)
Given that quantity demanded per period of time is a function of price and that the relation is expressed as: Q = 60 − 1/3 P, where Q is quantity demanded and P is the price,
(a) Find the quantity demanded when price is (i) N30.00 (ii) N210.00; (iii) N0.00
(b) comment on (a) (ii) above
(c) suppose the relation is now expressed as P = N (180 − 3Q); find P when: (i) Q = 0; (ii) Q = 60; (iii) Q = 59.
Show the model answer
(a)(i) Q = 60 − 30/3 = 60 − 10 = 50 units
(ii) Q = 60 − 210/3 = 60 − 70 = −10 units
(iii) Q = 60 − 0 = 60 units
(b) A negative quantity is impossible: at N210 nobody buys, so quantity demanded is zero. The function only holds for prices up to N180 (where Q = 0); the price is too high for the market.
(c)(i) P = 180 − 3(0) = N180
(ii) P = 180 − 3(60) = N0
(iii) P = 180 − 3(59) = 180 − 177 = N3
Substitute carefully and say what a negative answer means.