Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAP. 1] INTRODUCTION 9
(b)
Households give rise to the demand for goods and services, while business firms respond by supplying goods
and services. The demand and the supply of each good and service determine its price. In order to produce
goods and services, business firms demand economic resources or their services. These are supplied by households.
The demand and supply of each factor then determine its price. In microeconomics we study some of
the best available models that explain and predict the behavior of individual decision-making units and prices.
The empirical testing of these models is examined in other courses.
MARKETS, FUNCTIONS, AND EQUILIBRIUM
1.13 Suppose that (keeping everything else constant) the demand function of a commodity is given by
QD ¼ 6000 2 1000P, where QD stands for the market quantity demanded of the commodity per
time period and P for the price of the commodity. (a) Derive the market demand schedule for this commodity.
(b) Draw the market demand curve for this commodity.
(a)
By substituting various prices for the commodity into its market demand function, we get the market demand
schedule for the commodity as shown in Table 1.1.
Table 1.1
Price ($) 1 2 3 4 5 6
Quantity Demanded
(per unit of time)
5000 4000 3000 2000 1000 0
(b)
By plotting each pair of price-quantity values in the above market demand schedule as a point on a graph and
joining the resulting points, we get the corresponding market demand curve for this commodity shown in
Fig. 1-2.
Fig. 1-2
(A more detailed discussion of demand functions, demand schedules, and demand curves is presented in Sections
2.1 to 2.4.)
1.14 Suppose that (keeping everything else constant) the supply function for the commodity in Problem 1.13
is given by QS ¼ 1000P, where QS stands for the market quantity supplied of the commodity per time
period and P for the price of the commodity. (a) Derive the market supply schedule for this commodity
and (b) draw the market supply curve for this commodity.
(a)
By substituting various prices for the commodity into its market supply function, we get the market supply
schedule for this commodity as shown in Table 1.2.