Can someone run me through how to do this, my book is not helping at all

that being said i have gave it a go but would be helpful if someone could run through this practise question with me

1. A company manufactures widgets and knows that when they set the price of

one widget to £25 then their customers demand 30 widgets. However, if they

reduce the price of a widget to £20, demand then increases to 35 widgets. In

order to produce widgets the company faces fixed costs of £300 and variable

costs of £15 per unit.

a) Use the data regarding price and demand to determine the linear

demand function (recall the demand function will be of the form

p = aQ + b where p is price and Q is quantity) (9)

Re: Can someone run me through how to do this, my book is not helping at all

Substituting two given pairs (price, quantity) into the equation p = aQ + b, you get two equations on a and b. Then you need to solve the system of these two equations.

Re: Can someone run me through how to do this, my book is not helping at all

thankyou but i still do not understand 100%, i am very new to all of this

Re: Can someone run me through how to do this, my book is not helping at all

Quote:

Originally Posted by

**yoshimuru** thankyou but i still do not understand 100%, i am very new to all of this

Quote:

Substituting two given pairs (price, quantity) into the equation p = aQ + b, you get two equations on a and b. Then you need to solve the system of these two equations.

25 = 30a + b

20 = 35a + b

solve the system of equations for a and b ...

Re: Can someone run me through how to do this, my book is not helping at all

a=-1

b=55

thats what i got, sound right to you guys?, think im getting this tho not sure

Re: Can someone run me through how to do this, my book is not helping at all

Quote:

Originally Posted by

**yoshimuru** a=-1

b=55

thats what i got, sound right to you guys?, think im getting this tho not sure

Substitute your values in one of the original equations:

30a + b = 25

30(-1) + 55 = -30 + 55 = 25

So you're correct...OK?