Solve the system of equations
and
by the elimination method.
If we add the two equations, none of the variables are eliminated. But the variable
can be eliminated by multiplying the first equation by –2, and leaving the second equation unchanged.
In a free market economy the supply curve for a commodity is the number of items of a product that can be made available at different prices, and the demand curve is the number of items the consumer will buy at different prices. As the price of a product increases, its demand decreases and supply increases. On the other hand, as the price decreases the demand increases and supply decreases. The
equilibrium price is reached when the demand equals the supply.
The supply curve for a product is
and the demand curve for the same product is
, where
is the price and y the number of items produced. Find the following.
How many items will be supplied at a price of $10?
How many items will be demanded at a price of $10?
Determine the equilibrium price.
How many items will be produced at the equilibrium price?
We substitute
in the supply equation,
, and the answer is
.
We substitute
in the demand equation,
, and the answer is
.
By letting the supply equal the demand, we get
We substitute
in either the supply or the demand equation and we get
.
The graph below shows the intersection of the supply and the demand functions and their point of intersection, (6, 19).
In a business, the profit is generated by selling products. If a company sells
number of items at a price
, then the revenue
is
times
, i.e.,
. The production costs are the sum of the variable costs and the fixed costs, and are often written as
, where
is the number of items manufactured.
A company makes a profit if the revenue is greater than the cost, and it shows a loss if the cost is greater than the revenue. The point on the graph where the revenue equals the cost is called the
Break-even point .
If the revenue function of a product is
and the cost function is
, find the following.
If 4 items are produced, what will the revenue be?
What is the cost of producing 4 items?
How many items should be produced to break-even?
What will be the revenue and the cost at the break-even point?
We substitute
in the revenue equation
, and the answer is
.
We substitute
in the cost equation
, and the answer is
.
By letting the revenue equal the cost, we get
We substitute
in either the revenue or the cost equation, and we get
.
The graph below shows the intersection of the revenue and the cost functions and their point of intersection, (6, 30).