# ECON 1000 Lecture Notes - Anushree (Kannada Actress)

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Anushree Joshi DAY 7 LECTURE – September 27th

Professor: Kieran Furlong Microeconomics (ECON 1000)

Linear Demand Functions

- Demand = quantity response to price (example: for $_, how many beers would you buy?)

o Creating survey questions should be clear, you should be getting answers

- Example: Suppose a pub night results in 500 beer sold at $2.50 and another pub night results in

750 beer at $2.00. What is the linear demand function? *ON EXAM

o Linear demand = P = P-intercept + (change in P)/(change in Q) * Q

o Find the slope

P = price = x = 2.50 – 2.00 = 0.5

Q = quantity = y = 500 – 750 = -250

0.5 / -250 = -0.002

o So far: P = a – 0.002Q

o Plug in a point (P,Q) and solve for a

Use (2.50, 500)

2.50 = a – 0.002(500)

a = 3.5

o So far: P = 3.5 – 0.002Q

o Plug in the other point (P2, Q2) and solve for a again

Use (2, 750)

2 = a – 0.002(750)

a = 3.5

o So, P = 3.5 – 0.002Q is correct

o Examining total revenues, costs and profits

Total revenue at $2.50 is 2.5(500) = $1250

Total revenue at $2 is 2(750) = $1500

Fixed costs i.e. rent the bar, hire the bartender, etc.

Variable costs i.e. cost per beer for security, for bar rental, etc.

Trying to maximize revenue

Example: What is total revenue at P = $1?

Plug it into the demand function equation

1 = 3.5 – 0.002Q

Q = 1250

Total revenue = 1(1250) = $1250