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Demand and Supply Functions

The document outlines demand and supply functions, along with production, cost, and profit functions. It includes formulas for average and marginal production, and methods to find labor and output for maximum production and minimum cost. Additionally, it discusses how to calculate maximum profit by analyzing total revenue and total cost functions.

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nuraisyaahbatubara
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2 views2 pages

Demand and Supply Functions

The document outlines demand and supply functions, along with production, cost, and profit functions. It includes formulas for average and marginal production, and methods to find labor and output for maximum production and minimum cost. Additionally, it discusses how to calculate maximum profit by analyzing total revenue and total cost functions.

Uploaded by

nuraisyaahbatubara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Demand and Supply Functions

 Demand function: Qd = 24−4PQ_ d = 24 - 4P


 Supply function: Qs = 2P−2P2Q_ s = 2P - 2P2

6. Production Function

Q = 99L + 121L2 − L3

(e) Average Production (APL) and Marginal Production (MPL) Functions

 APL : APL= Q/L = 99L + 121L2− L3/L

= 99 + 121L− L2

 MPL : MPL= dQ/dL = 99 + 242L − 3L2

(f) How much labor and output is used?

To find the labor and output used, equate MPL to zero to find the critical points:
99 + 242L− 3L2 = 0

(g) How much labor is used to get maximum output?

Differentiate MPL with respect to L and solve dMPL/dL = 0


Verify whether the critical points maximize Q.

(h) How much is the maximum output?

Substitute the value of L from part (g) into the production function Q to get the maximum output.

7. Cost Function

TC = 0.5Q2 + 300Q + 1800

(c) How much Q needs to be produced so that cost is minimized?

Find the minimum Q by calculating the derivative of TC:


dTC/dQ = Q + 300
Set dTC/dQ = 0 and solve for Q.

(d) How much is the minimum Average Cost?


The Average Cost AC = TC/Q
AC = 0.5Q2 + 300Q + 1800 / Q
Simplify and substitute QQ from part (c) to calculate the minimum AC.

8. Demand and Total Cost Functions

 Demand function: P = 875 − 30Q


 Total cost: TC = Q3 − 30Q2 + 200Q + 1000

(e) How much product needs to be produced for maximum profit?

Profit is π = TR−TC, where TR = P⋅Q = (875 − 30Q)Q


π = 875Q − 30Q2 − (Q3 − 30Q2 + 200Q + 1000)
π= −Q3 + 60Q2 + 675Q – 1000

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