Theory question 101
Theory of SupplyGiven that the prices and quantities supplied per period of time in litres of gasoline is expressed as:
Qs = 25 + 0.25P
where Qs is quantity supplied
P is price
(a) Determine the quantity supplied when price per litre is (i) 0 Naira; (ii) 24 Naira; (iii) 40 Naira; (iv) 60 Naira; (v) 80 Naira.
(b) From your calculations in (a) (i) present the supply schedule; (ii) draw the supply curve.
Show the model answer
(a) (i) 25 + 0.25(0) = 25 litres
(ii) 25 + 0.25(24) = 31 litres
(iii) 25 + 0.25(40) = 35 litres
(iv) 25 + 0.25(60) = 40 litres
(v) 25 + 0.25(80) = 45 litres
(b)(i) Schedule: Price (N) 0, 24, 40, 60, 80 against Quantity (litres) 25, 31, 35, 40, 45
(ii) Price on the vertical axis, quantity on the horizontal axis; plot the five points and join them: an upward-sloping straight line that starts at 25 litres when price is 0; label it S and title the graph.
Substitute each price into the equation; a correct graph needs labelled axes, a suitable scale and the curve labelled S.