Deriving demand and supply equations from a set of data

Suppose all you knew were a couple of points from a demand or supply schedule, and you were asked to determine the equations that described the demand and supply of the product. For example, what if you knew that,

  • At a price of $5, 1,000 movie tickets would be demanded in a small town, but only 200 would be supplied, while,
  • At a price of $15, 300 movie tickets would be demanded and 1,200 would be supplied.
Could you use this information to derive the demand and supply equations for movie tickets? Could you then calculate the equilibrium price and quantity of movie tickets? Watch the video lecture that follows, and then apply what you learned to find the demand and supply equations for movie tickets using the data above. Also determine the equilibrium price and quantity of movie tickets.

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Calculating the effects of protectionist subsidies – an IB HL exercise

Assume that the government of Bangladesh wishes to increase the production of leather by its domestic leather manufacturers, and simultaneously decrease the amount of leather products imported into the country. The government provides a subsidy of $2 per kilo of leather. The result is as follows:

  • Before the subsidy, the quantity of leather produced in Bangladesh was 10 million kilos, and 20 million kilos were imported at a price of $5 per kilo.
  • After the subsidy, the quantity of leather produced in Bangladesh is 15 million kilos, and only 15 million kilos are now imported. the price is still $5 per kilo.
  • Assume that at any price below $1, the domestic quantity supplied would be zero (in other words, the domestic supply curve begins at $1.
The video below explains how to illustrate the effects of a subsidy on the market for leather in Bangladesh. After watching the video, complete the questions that follow. (You will notice that the video does not answer the questions for you, because it does not calculate the various areas you are asked to calculate below).

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Linear Demand Equations – Shifts in Demand (changes in the ‘a’ and the ‘b’ variables)

In our 3rd lesson on linear demand equations we’ll learn how a change in a non-price determinant of demand can cause the ‘a’ variable to change and a shift inwards or outwards of the demand curve along the quantity axis.

In our final lesson on linear demand equations we’ll look at how a change in a non-price determinant of demand can cause the demand curve to pivot along the quantity axis, changing the ‘b’ variable, resulting in either an increase or a decrease in the responsiveness of consumers to price changes.

Linear Demand Equations – part 3

Linear Demand Equations – part 4

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Introduction to Linear Demand Equations

This is an update to the 2012 version of the lesson introducing how to determine an equation for demand using price and quantity data from a demand schedule or a demand curve. In parts 2 and 3 of this lesson we’ll examine how changes in price and the non-price determinants of demand will lead to movements along a demand curve or a change in the ‘a’ and ‘b’ variables and a shift in demand.

Linear Demand Equations – Part 1

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