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Harit Thakuri Staff answered 3 weeks ago
- 1. Functions in Economics
- 1) Demand function: Let p denotes the price of a good and D its demand. The word demand function means we should expect that the demand D is a function of price p and written as D = f(p). This is mathematical convention, but in actual economics ( since days of Marshall) price p is considered as a function of the demand D and still called the demand function and write it as p = g (D). e.g. 1) p = 3 + 5D 2) p = 7D + ????2 are the demand functions.
- 2) Supply function: Let p denotes the price of a good and S its Supply. The word supply function means we should expect that the supply S is a function of price p and written as S = f(p). This is mathematical convention, but in actual economics ( since days of Marshall) price p is considered as a function of the supply S and still called the Supply function and write it as p = g (S). e.g. 1) p = 3 + 2S 2) p = 4S + ????2 are the supply functions.
- 3) Total Revenue Function (R): Total Revenue = (Price ) X ( Demand quantity) i.e. Total Revenue Function is the product of Price ‘p’ and Demand ‘D’. i.e. R = pD. • Ex.: The demand function of a commodity is given by p = 18 + D - ????2 . Find the total revenue function and also find the total revenue when D = 2. • Soln.: here The demand function is p = 18 + D - ????2 Total Revenue Function R = pD = (18 + D- ????2 )D = 18D + ????2- ????3 and also (????)????=2 = 18(2) + 22- 23 = 36 +4 -8 = 40-8 = 32
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